Gap insurance is a form of vehicle coverage that provides extra protection during the time when the new owner is still paying off the car loan. Deciding how much and what type of gap coverage you need requires looking closely at the current balance due on the loan, and comparing that amount to the actual cash value of the vehicle. From there, it is important to shop around for the best rate available from reputable insurance providers.
Unlike standard auto insurance, gap insurance pays based on how much is still owed on the car loan. This is in contrast to standard auto coverage, where the actual cash value of the car may be considerably less than what is owed. It is this difference that makes it essential to determine just how much gap coverage you really need. Automobiles depreciate at different rates, based on makes, models, age, and features. By determining the amount of coverage you need to pay off the car loan in the event of a complete loss, it is possible to focus your attention on plans that allow you the right coverage level.
Ideally, this extra coverage will be sufficient to cover any difference or gap between what your insurance provider will recognize as the cash value of the vehicle and what you actually owe. In addition, some gap plans will also cover any deductible that applies to your standard auto insurance. This means that if your car is stolen, your standard insurance will process the claim and pay current cash value, less your deductible. What you want the gap coverage to do is pay your deductible, plus cover the difference between the cash value and the remaining balance on the car loan.
Once you know exactly how much coverage you need, compare plans offered by different providers. Make sure that the coverage not only involves covering the balance remaining on the car loan, but also any deductibles that apply to your standard insurance. Read the terms and conditions very carefully, so you understand what types of events are and are not covered. In addition, make sure the coverage complies with the standards set by the Driver and Vehicle Licensing Agency (DVLA).
Be prepared to pay a higher premium if you want coverage for an event that has a higher probability of occurring. For example, if you live in an area where flooding is not uncommon, you will pay a higher premium in order to have your gap insurance cover the vehicle in situations involving flood damage. Take your time and compare the terms of each possible plan carefully. This will allow you to make an informed choice, and be prepared should some disaster strike before the car note is retired.
Unlike standard auto insurance, gap insurance pays based on how much is still owed on the car loan. This is in contrast to standard auto coverage, where the actual cash value of the car may be considerably less than what is owed. It is this difference that makes it essential to determine just how much gap coverage you really need. Automobiles depreciate at different rates, based on makes, models, age, and features. By determining the amount of coverage you need to pay off the car loan in the event of a complete loss, it is possible to focus your attention on plans that allow you the right coverage level.
Ideally, this extra coverage will be sufficient to cover any difference or gap between what your insurance provider will recognize as the cash value of the vehicle and what you actually owe. In addition, some gap plans will also cover any deductible that applies to your standard auto insurance. This means that if your car is stolen, your standard insurance will process the claim and pay current cash value, less your deductible. What you want the gap coverage to do is pay your deductible, plus cover the difference between the cash value and the remaining balance on the car loan.
Once you know exactly how much coverage you need, compare plans offered by different providers. Make sure that the coverage not only involves covering the balance remaining on the car loan, but also any deductibles that apply to your standard insurance. Read the terms and conditions very carefully, so you understand what types of events are and are not covered. In addition, make sure the coverage complies with the standards set by the Driver and Vehicle Licensing Agency (DVLA).
Be prepared to pay a higher premium if you want coverage for an event that has a higher probability of occurring. For example, if you live in an area where flooding is not uncommon, you will pay a higher premium in order to have your gap insurance cover the vehicle in situations involving flood damage. Take your time and compare the terms of each possible plan carefully. This will allow you to make an informed choice, and be prepared should some disaster strike before the car note is retired.
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