Wednesday, September 19, 2012
Mind the GAP
GAP insurance coverage helps pay for the difference between actual cash value of the car and what is owed on the loan or lease. One thing to keep in mind though, GAP insurance from personal auto insurance companies does not cover the cost of warranties or other add on charges that might have been included in the loan or lease.
So for an example, you totaled your vehicle and the insurance company is going to value your car at $5000 but your loan was still $7000. Let’s also say that of the $7000, $500 of it is because of the warranty that you had purchased. Therefore, the insurance company (if GAP insurance was on your policy) would give you $6500 ($7000 due on the loan minus the $500 warranty cost) instead of $5000.