Archív štítků: Prices of Gap Insurance
People buy cars basically as their primary means of transport. A car can be used to commute from home to work, school, college, grocery shopping, the mall as well as plenty of other places. A majority of people buy their car through some form of credit, such as an auto loan or car finance. Only a few pay cash for their auto purchase.
Gap insurance is insurance taken on a car purchased on credit, and the new owner still owes money on the car. When a car is purchased, anything could go wrong. That is a possibility.
For example, the car could get into an accident and be written off, it could get damaged and become unusable or it could even get stolen and never be found.
When such unfortunate incidents occur, the buyer of the car will still be responsible for making the monthly repayments, even though he may never see the car again. This may sound very unfair, but it is the case.
Supposing the car was insured against theft, or may be the car had comprehensive cover. If it gets stolen or totaled, the insurance company will calculate the value of the car based on its current market value. Now, motor vehicles lose value very rapidly.
Just buying a new car and driving it out of the dealership or yard may lose the car up to 25 per cent of its value. This difference will still be footed by the car buyer, even if they had comprehensive insurance.
This is why gap insurance is very important. It covers the buyer of the car whenever one of the unfortunate events occurs. Now, supposing the car buyer decides they want to sell their car, even before they finish paying it off. This can be done, by letting a dealer sell the car and deal with the paperwork. Once the car has been sold, the dealer will inform the car owner.
Gap Insurance Refinance
Whenever a person refinances their car loan, it is important that they read the terms of their contract. If the buyer had a gap insurance policy, it may become void upon refinance. However, this is not always the case. It is important to ensure that adequate information is available, rather than make assumptions.
Contact the dealer, and the insurance provider. In most cases though, this fact would be clearly spelled out. It is imperative that a car buyer who undertakes refinancing talk to their dealer and their insurance provider to clarify the position of their gap insurance.
Any car, new or used, loses up to 25 per cent of its value immediately it leaves the yard or dealership.
If a car, purchased on credit or finance terms gets wrecked beyond repair, is totaled or gets stolen, the buyer will still be liable for making the car payments as usual.
If the car had comprehensive insurance cover, then the insurance cover would make payments for the car at its current market value.
The car dealer would be expecting the difference between the market price and the buying price, to be footed by the buyer. This amount is usually quite considerable, between 10,000 and 25,000 dollars. Footing this bill is not easy, especially if it is payments for a car that is stolen or wrecked beyond repair.
This is where gap insurance comes in handy.
Gap insurance covers the difference between the car purchase price and the car’s market value at the time it was totaled. In the state of California, auto insurance companies allow buyers to acquire gap insurance for vehicles up to eight years old, but not older.
This is good news as the car buyer can walk away from a car accident and not have to pay a cent for a totaled car, yet be able to negotiate a new loan for another car.
In the state of California, gap insurance is not mandatory and car buyers can get away without paying for this insurance cover. However, the roads and highways in California are not getting any safer and it is much better to have gap insurance than to not have it.
Gap insurance is refundable in California. However, this depends on a number of factors. If a car, purchased on credit or finance has gap insurance, it can be sold off to a third party and the initial owner cam then make a claim for the gap insurance that they paid.
It is important to note that documentation regarding the car sale, insurance and others, will be required to effect the refund. Refund based on a refinance option is not always guaranteed and will depend on the car dealer, car sale agreement as well as the terms of the Gap insurance. It is always important to clarify this fact early.