0/60 New Car Loan? Then You Need Gap Auto Insurance



Posted: Thursday, December 22, 2011

by Sam Streubel
Alternative-Heating-Info.com

Gap insurance auto coverage is important only when the following two conditions are present:

1. You finance the purchase of a new or used car.

2. You will be making a down payment of less than 20%.

And if you take advantage of one of the many 0 down/60 month lending offers you undoubtedly have to have gap coverage.

Nevertheless even when you do require gap insurance, it is only essential for as long as the outstanding loan balance is greater than the actual cash value of your vehicle. Normally what this means is a period of 21/2 to 3 years. Normally towards the end of the 3rd year of payments your vehicle’s loan balance should approximate the cash value of your car or truck.

At that point the gap insurance could be discontinued; but only if it was purchased as a rider to a comprehensive policy sold by an insurance company.

If, on the other hand, you get gap vehicle insurance coverage from a dealership it cannot be terminated simply because you make a one time, up front payment.

Another critical difference between acquiring gap insurance from an insurance company or dealership is cost. Gap insurance coverage obtained from a auto dealer may cost any where from $500 - $700, while the same coverage bought from an insurance provider will add only 5 or 6% to the price of your collision coverage, or approximately $30 each year.

So if the loan balance and the cash value of your car or truck achieve parity within three years as suggested above, you'll have paid out a total of approximately $90 for gap protection instead of hundreds of dollars more for coverage from a auto dealer.

Now, as though $30 per year wasn’t cheap enough, it's possible to trim this amount even further. Because the cost of gap auto coverage is a percentage of the cost of comprehensive coverage, the less you pay for comprehensive collision coverage, the less you will pay for gap.

This offers a win, win situation for every new car owner requiring gap insurance; particularly if you have the time to review a number of quotes from insurance carriers currently competing for your business on tv.

But not all insurance providers offer gap insurance auto coverage. For a list of those who do, please see this selection of gap insurance providers.
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