GAP insurance
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Guaranteed Asset Protection (GAP) insurance(also known asGAPS) was established in the North Americanfinancial industry.GAP insurance protects the borrower if the car iswritten off or totalledby paying the remaining difference between the actual cash value of a vehicle and the balance still owed on the financing.[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 amount owed and the amount covered by anotherinsurance policy.[1]Some GAP policies also cover the deductible.[3]This coverage is marketed for lowdown paymentloans, 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. Mostauto insurancecompanies offer this coverage to consumers. GAP insurance is often paid upfront and the purchaser is usually entitled to a refund of the unused portion of the premium if the vehicle is sold or refinanced before the end of the loan term.[4]
There are two ways of getting GAP coverage. The first type is an insurance policy sold by a broker. The second type is awaiveragreement 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 thecar 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-partyappraiser.[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.[5]GAP is an optional purchase, but 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.[6]States such as Louisiana require that the purchaser sign a disclosure document as proof.[7][8]Although GAP is optional, some finance companies require GAP as a condition to obtaining a loan.[2]TheTruth in Lending Actexcludes 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]
- ^ab"Gap Insurance".Retrieved19 June2013.
- ^abReed, Philli[."Gap Insurance: How It Impacts Your Car Loan or Lease".Retrieved19 June2013.
- ^Sage, Bobbie."Gap Car Insurance Coverages".Archived fromthe originalon 13 May 2013.Retrieved19 June2013.
- ^Caucutt, Joshua."What Is Gap Insurance Coverage for Cars – Is It Worth It?".Retrieved19 June2013.
- ^"What's behind GAP loss ratios?".cbtnews.com.May 16, 2017.
- ^"RCW 48.22.060".Retrieved19 June2013.
- ^"Louisiana Motor Vehicle Commission GAP Disclosure Form"(PDF).Retrieved2012-03-28.
- ^"GAP Coverage Disclosure"(PDF).