When a vehicle is leased or purchased through financing, the owner accepts a financial burden if the value of the vehicle exceeds the amount owed on it. But the deficits in actual cash value can be protected with general auto protection insurance, which is a worthwhile yet cheap auto insurance plan.
If a financed vehicle is declared a total loss by an auto insurer, the amount paid for a claim minus any deductible will be based on the vehicle’s actual cash value and not its replacement value. So if the vehicle depreciates rapidly or the owner has a loan with a high interest rate, there could be hundreds or even thousands of dollars owed on it and payable on demand by the finance companies if totaled.
Fortunately, gap insurance protects against the costs coming from those kinds of mishaps and is a very cheap auto insurance enhancement that can save policyholders a lot of cash. When buying a vehicle financed for more than five years, it is a good idea to buy protection against the potential gap between the high interest rate charged on the vehicle and the loan balance compare to its actual cash value minus any deductible amount that might apply to the coverage.
People who have a poor credit rating but get loan to finance a vehicle could benefit from the protection provided by gap insurance plans. High-interest auto loans usually last many years and often times make the owners pay far more than the vehicles were worth. If those vehicles are stolen, damaged or declared a total loss by insurers due to a covered peril, their actual cash value will not be cover the thousands of dollars owed on a high-interest loan.
Unless a gap policy in in effect, an insurer will not pay off what is owed on a loan if an insured vehicle is declared a total loss. Although the principle of indemnity requires an insurer to restore the policyholder to his or her prior condition before the loss occurred, and insurer is not required to pay off the full value of a loan used to secure the insured item. The insurance company only is required to pay a reasonable cash value less any applicable deductibles.
A gap insurance plan costs pennies on the dollar for the coverage given and is a cheap auto insurance enhancement that can add up to thousands of dollars in savings for policyholders who file claims. It’s best to shop around for gap insurance and not buy it from the dealership where a vehicle might have been purchased. Gap policies can be bought at nearly any point during the ownership period, and many auto dealers will charge much more than necessary for gap insurance coverage.
If a financed vehicle is declared a total loss by an auto insurer, the amount paid for a claim minus any deductible will be based on the vehicle’s actual cash value and not its replacement value. So if the vehicle depreciates rapidly or the owner has a loan with a high interest rate, there could be hundreds or even thousands of dollars owed on it and payable on demand by the finance companies if totaled.
Fortunately, gap insurance protects against the costs coming from those kinds of mishaps and is a very cheap auto insurance enhancement that can save policyholders a lot of cash. When buying a vehicle financed for more than five years, it is a good idea to buy protection against the potential gap between the high interest rate charged on the vehicle and the loan balance compare to its actual cash value minus any deductible amount that might apply to the coverage.
People who have a poor credit rating but get loan to finance a vehicle could benefit from the protection provided by gap insurance plans. High-interest auto loans usually last many years and often times make the owners pay far more than the vehicles were worth. If those vehicles are stolen, damaged or declared a total loss by insurers due to a covered peril, their actual cash value will not be cover the thousands of dollars owed on a high-interest loan.
Unless a gap policy in in effect, an insurer will not pay off what is owed on a loan if an insured vehicle is declared a total loss. Although the principle of indemnity requires an insurer to restore the policyholder to his or her prior condition before the loss occurred, and insurer is not required to pay off the full value of a loan used to secure the insured item. The insurance company only is required to pay a reasonable cash value less any applicable deductibles.
A gap insurance plan costs pennies on the dollar for the coverage given and is a cheap auto insurance enhancement that can add up to thousands of dollars in savings for policyholders who file claims. It’s best to shop around for gap insurance and not buy it from the dealership where a vehicle might have been purchased. Gap policies can be bought at nearly any point during the ownership period, and many auto dealers will charge much more than necessary for gap insurance coverage.
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