So for example; you buy a 2012 Escape at $28,000 dollars. Drive it off the dealer lot and 6 months down the road there is an accident, air bags go off, 4 quarter panels are destroyed and the frame is in trouble and the car is totaled … you now owe more than the blue book value of the car.
Gap insurance can provide the additional coverage required to pay the loan off in full should a total loss take place. Learn how to protect your financial future by answering a few questions and then speaking with your insurance agent to obtain a quote.
Have you recently purchased or refinanced a car, or are you within the first two years of a five-to-six-year car loan? If so, you might owe more than the car is worth. Gap insurance may prove to be a good way to protect your investment and allow you to make a fresh start in the event of a major accident or other covered loss.
Are you able to pay the difference between the current loan and actual cash value of the car – plus deductibles and co-payments – out of pocket? If not, gap insurance might be a good investment. For a fraction of the cost required to set aside funds required to pay off the balance of a car loan plus other out-of-pocket expenses, auto gap insurance reduces the risk associated with rapid depreciation.
What is the actual cash value of your auto? Ask your agent what the maximum amount of payoff would be in the event of a total loss for your car, then compare it to the current outstanding balance. Most people find gap insurance an essential yet affordable part of their financial planning.