Have you been hearing the words “gap insurance” floating through the radio waves and the cyber stratosphere? We have. Perhaps you wonder, “What is this ‘gap’ insurance? Is it something to do with the clothing store? What ‘gap’ exactly are we talking about here?” Though disappointingly not clothing related, we do have some answers for you about gap insurance:
Gap insurance falls within the realm of automobile insurance. Here’s a story to explain:
In your hand you hold the keys to your new [insert dream car here], and it cost $30,000. You put $1,000 down, and have $29,000 more to look forward to in the coming years. In addition, responsible car-owner you are, you purchased comprehensive and collision coverage with a $500 deductible…and thank goodness you did, because in under two months that beautiful dream car is totaled. You file a claim, and are informed insurance will disburse a payment to cover your vehicle’s actual cash value: $26,000. Right behind that letter however, arrives another informing you of a $28,000 you still owe on your car– leaving you with $2,000, plus the $500 deductible, to cover out of pocket. This is the “gap” of gap insurance. Gap insurance covers the difference between what you owe on your car and what your car insurance company is willing to pay for it.
Now that we’ve defined the gap, we’ll help you understand how to cover it. Most agencies will allow you to purchase gap insurance after purchasing comprehensive and collision coverage. Gap insurance will usually be a few extra dollars a month– and could potentially save you thousands. If purchased through your dealership, it will cost from about $500 to $1000, and they will most likely ask for a large up-front fee.
If you own a car now, you can call your insurance agency and ask to add gap insurance. Over time, the “gap” will diminish, as you make car payments, and the vehicle’s actual cash value lessens. When the gap is gone, you may remove gap insurance.
BMR Insurance is ready and equipped to assist you in exploring your gap insurance options with us, as well as other automobile insurance avenues we cover. Give us a call at (714) 838-1911 for a free insurance review appointment.