How To Enhance Your Driving Experience: Part 2
We talked about how an extended service contract can enhance your driving experience here, now let’s talk about something that is just as beneficial to you – GAP insurance. Everyone is aware of the basic insurance options – car, life, health. However, it is important to note that this is not considered a part of your car insurance; obviously there are exceptions to that, but they are few and far in between.
The first major element to note is that GAP insurance is only applicable to those who have financed their transaction. The second is that this insurance would only need to be in place for as long as you have your loan – once that is paid off, the GAP insurance is no longer needed. Lastly, about a third of all those who have a loan out on their vehicle have negative equity, meaning your trade is not worth as much as you owe on your loan.
Now what exactly is the purpose of GAP insurance? The best way to illustrate its use is through a hypothetical situation. Now let’s say that you have a vehicle that you owe $10,000 on and you get into an accident in which your vehicle is considered a total loss. Thankfully, you were okay, but your car is not. You make an appointment with the adjuster, they do their assessment, and they tell you that your car is worth a whopping…$5,000. What?! So what happens now? They’re only going to cut you a check for $5,000, where are you supposed to get the other $5,000? Your vacation fund? Your kid’s college savings fund? Or heaven forbid your money that should be going towards your bills and rent? This is where GAP insurance steps in. In the case of a total loss, GAP insurance would pick up any discrepancy between what you owe and what your insurance claims your vehicle is worth.
The best part, this is something that can very reasonably fit into your budget – at the cost of a fast-food meal no less. Sure, it might seem a little far-fetched, what are the odds that you are upside down in your loan and you get in a major car accident? But isn’t that why we purchase the insurances? The renters or homeowners insurance, the life insurance policies – because things happen! Why cause unnecessary distress when you don’t need to.
As a few parting words of caution, I would recommend that you avoid purchasing GAP insurance through your car insurance company. The reasoning here is that they are the company that is telling you how much your car is worth, and they know how much you owe on your vehicle, so there is potentially one money pitfall. Have any questions about if GAP is right for you? Contact our business manager today!