Like most things that you absolutely need, there has been no attempt whatsoever to make insurance interesting.
While we can’t promise to make insurance exciting, we can give you everything you need to know on gap insurance.
You’d be shocked at how often drivers are left footing the bill (sometimes into the thousands) when the market value paid for their car is less than their finance commitments.
Here's an example: You buy a near-new, lightly used sedan for $30,000 on a five-year loan with a $3000 deposit.
So you owe $27,000 plus interest. You make repayments at $500 every month, and after 6 months your car gets stolen and wrecked. So after 6 months of making payments to your lender, that’s another $3000 off your loan – you now owe $24,000 on the primary loan, plus interest.
But after six months of driving, and using the market value immediately before your car was totalled, your car is valued at $20,000. Your insurance will pay this amount less any excess, but your lender still needs $4000 to pay out your loan – this is where gap insurance steps in.
Rather than pulling out the credit card, gap insurance will cover any difference with your insurers pay out. This applies to the life of any car loan (generally up to 7 years.)
You may be the most careful driver in the world, but not everyone is you – if your car is taken out by a reckless driver, you’ll be even more sour if you have to take money out of your own pocket to break even on your car loan.
It’s especially useful if you are injured in an accident, and have to take time off work – giving you peace of mind that you don’t have to make frantic calls to your lender from the hospital.
Gap insurance provides added protection for your credit rating and gives you the potential to borrow less if and when you decide to purchase a replacement vehicle.
The friendly, expert Business Managers at Motorama can take you through the entire process to get your car insured, so make sure to sit down with them next time you’re at the dealership to tailor an insurance package to suit your needs.