GAP stands for Guaranteed Asset Protection. As the term implies, GAP auto insurance closes the gap between what your insurance company pays you when your car gets totaled and what you owe to the finance company. Having a GAP policy is imperative, especially when you decide to buy a car with small down payment. Let’s take a look at the following example to better understand the importance of buying a GAP policy.
Let’s say that you purchased a car for $ 30,000 with a small down payment. After paying installments for three months, your car met with an accident and was declared a total loss. After you informed your insurance company, they decided to pay you only $24,000. According the insurance company, the car lost $6,000 from its original value within these 3 months. However, you owe the full $ 30,000, plus the cost of tax to the finance company. Ultimately, you are in situation where you have to pay more than $ 6000 from your pocket.
Being under the cover of GAP insurance can save you in such a situation. GAP insurance helps you to get total coverage in situations like this.
2. Terminating auto insurance policy
There may be different reasons why you want to terminate your current car insurance policy. May be you found a more affordable auto insurance quote, or planning to relocate to another state. In any case, it is important that you inform your current insurance company about your decision well in advance through a formal notice. Not doing so may cause you to pay more than what you owe, and/or affect your credit rating in the long run.
Many policyholders have a misconception that a car insurance policy automatically terminates at the end of each policy term. However, that’s not always a case. If you don’t send a cancellation notice to your insurance company, your bill for the next month will come as usual. And when you don’t pay it, you policy will be cancelled. Eventually, this affects your credit rating.
3.Repair parts
Another issue may be regarding the quality of replacement parts used for repairing your car. Some auto insurance companies dictate a repair shop about what kind of parts they should use. Basically, there can be two kinds of replacement parts – OEM parts and aftermarket parts. While OEM parts come directly from the manufacturer, aftermarket parts are basically used parts bought from third parties. Not to mention, OEM parts are good in quality and more expensive. Many insurance companies dictate repair shops to use aftermarket replacement parts. As a policyholder, you have to be more cautious about these things.
To be able to deal with these issues more effectively, you should keep yourself more informed with latest insurance related news and reports.
About the author: Aliya Martin is a financial consultant with wide experience in the insurance domain. As a writer and blogger, she loves to provide information and opinions on various types of insurance and these days, she is working on auto insurance quote. To know more about affordable car insurance, visit our site.
