GAP Insurance

From Wikipedia, the free encyclopedia - View original article

 
  (Redirected from Gap insurance)
Jump to: navigation, search

GAP Insurance is also known as GAPS and was established in North American financial industry]. GAP Insurance is the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease, etc.).[1] GAP coverage is mainly used on new and used small vehicles (cars and trucks) and heavy trucks. Some financing companies and lease contracts require it.[2]

GAP insurance covers the amount on a loan that is the difference between the asset value and the amount covered by another insurance policy.[1] Some GAP policies also cover the deductible.[3] This coverage is marketed for low down payment loans, high interest rate loans and loans with 60 month or longer terms. GAP insurance is typically offered by a finance company at time of purchase. Most auto insurance companies offer this coverage to consumers.[4] GAP insurance is usually paid upfront and, for that reason, one is eligible for a refund if he/she sells or refinances their vehicle.[5]

There are two ways of getting GAP coverage. The first type is an insurance policy sold by a broker. The second type is a waiver agreement sold by a Finance & Insurance Manager. The first is regulated by the insurance industry, the second is unregulated.[citation needed] In either case coverage is usually the same and sold as a soft product through the car dealership. Coverage is usually financed along with the lease/loan. Claims are subject to a total loss. The total loss is usually determined by the primary insurance company’s third-party appraiser.[citation needed]

Exclusions to GAP insurance vary by country or state. Some exclusions include a maximum loss limit of $50,000 while others require a loan term of less than 84 months.[6] GAP is an optional purchase; however, many states in the US require that a car dealership offer GAP at the point of purchase. Other states require insurers to offer GAP if a client requests it.[7] States such as Louisiana require that the purchaser sign a disclosure document as proof.[8] Although GAP is optional, some finance companies require GAP as a condition to obtaining a loan.[2] The Truth in Lending Act excludes GAP premiums from financial charges if GAP was not required by the creditor, the premiums were disclosed in writing, and the consumer provides a written request for the insurance.[citation needed]

See also[edit]

References[edit]

  1. ^ a b "Gap Insurance". Retrieved 19 June 2013. 
  2. ^ a b Reed, Philli[. "Gap Insurance: How It Impacts Your Car Loan or Lease". Retrieved 19 June 2013. 
  3. ^ Sage, Bobbie. "Gap Car Insurance Coverages". Retrieved 19 June 2013. 
  4. ^ Steinisch, Monica. "Gap Insurance for Your Car: Do You Need It?". Retrieved 19 June 2013. 
  5. ^ Caucutt, Joshua. "What Is Gap Insurance Coverage for Cars – Is It Worth It?". Retrieved 19 June 2013. 
  6. ^ "GAP Insurance". Retrieved 2012-03-28. 
  7. ^ "RCW 48.22.060". Retrieved 19 June 2013. 
  8. ^ "Louisiana Motor Vehicle Commission GAP Disclosure Form". Retrieved 2012-03-28. 

http://www.fi-magazine.com/article/story/2006/11/the-obligation-and-risk-of-selling-gap.aspx