What Is Gap Insurance? In order for anyone to understand what is gap insurance, it is important to first know what it is not. Gap insurance is not the type of auto insurance that pays off a claim once an automobile has been totaled. GAP insurance actually protects the lender if the vehicle is completely totaled out. If the vehicle is paid off and the loan is still active, the lender will have no obligation to pay off the outstanding balance, which means that this type of coverage will not apply.
There are many reasons why an individual may want to purchase gap insurance. Some reasons are to protect the individual's investment. Individuals who lease cars or vehicles often have other obligations that they have to fulfill. Gap coverage can provide extra protection should something occur and the vehicle is completely totaled out.
Other individuals purchase gap insurance because they have an outstanding loan on their vehicle. If an accident occurs and the driver does not have any coverage to pay off the outstanding loan, then the person who owns the vehicle does not have to worry about whether they are going to be able to afford to repair or replace their vehicle. The person who owes the money still owes it and this coverage will ensure that the person who owes the money is able to get the vehicle replaced.
What Is Gap Insurance?
The best way for anyone to determine what type of gap insurance is the best for them is to take a look at their own situation. The main reason why anyone would need gap coverage is because they are paying on a vehicle that is not worth very much. For example, a car that is paid off but still has thousands of dollars of debt on it. The driver may have no other options to cover the debt and the vehicle may be the only option. Gap insurance will pay off the debt in full, so that the driver does not have to worry about losing their car and still owe all of the money on it.
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Many companies offer gap coverage to those who lease cars. The reason why this is a good idea for someone who is leasing a vehicle is because many lease companies will require a certain amount of liability coverage before they will issue a lease. This means that the lease holder will end up paying the vehicle insurance company until they have made their monthly car payments. Having gap insurance will allow them to make sure that they never have to worry about being upside down on their vehicle payments.
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There are many other reasons why a person may need gap insurance as well. Anyone who has a home that is paid off but still owes some outstanding finance charges will benefit from having this type of protection. The finance company may have issued a lien against the home and the person who owes the money is unable to come up with the full amount owed. Gap coverage will allow them to get away with not paying those charges, but it will also help them to protect their home.
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Another person who may be able to benefit from this type of policy is someone who has financed a vehicle but is still owing a portion of the loan. If the vehicle was financed at a fair market value, the person would probably be able to get away with not paying anything and simply walking away. However, this is not always the case and that means that the person will have to pay the loan amount. Gap insurance will protect them from being stuck with that responsibility. It will also mean that the vehicle can be sold if the vehicle is being financed at an unfair market value.
Gap insurance is usually purchased by those who have a low income or someone who has already had a ticket issued against them. These people will not necessarily need to have the coverage for every occurrence that occurs, but the policy will give them enough of coverage to keep them out of trouble. There are many insurance companies that offer this coverage, so the buyer will want to do some comparison shopping before they make the final decision on what kind of policy to purchase. The premiums for these policies can be expensive, but most insurers recognize that there are people who genuinely cannot afford to purchase gap insurance. This is why the deductible amount can often be very low, which means that the cost of coverage will still be very reasonable.
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