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Automobile Loan GAP Coverage

When purchasing a car, one of the last things you want to think about is totaling your vehicle and still being upside down on your loan. Endorsements like GAP coverage can save your pocket book on the insurance side of things. Many clients are simply not being offered or understand this coverage and most of the time it’s not an elected coverage. If obtaining financing through the dealership they generally offer GAP coverage, but it’s something you could also place on your insurance policy at a more reasonable rate.

Basic Conditions to Apply for GAP Coverage

With adding GAP coverage to your auto policy, there are a couple of stipulations to make sure you qualify. One of those is that you are the original owner of the vehicle and the other is that it is less than two model years old. If you meet those two requirements Allied Insurance can provide the coverage and is something worth looking into. The point of carrying this coverage is to protect yourself from having to pay out of pocket in the event of a total loss to your vehicle toward your existing loan.

Benefits of GAP Coverage

An auto insurance policy generally pays out the amount of what your vehicle is valued at during the time of the total loss at market value. So when you drive a brand new car off the lot, the vehicle generally depreciates greatly in value as well as you may be upside down on a loan with a trade in for example. So if you total your vehicle and the insurance company claims that it is only worth $10,000, but you still owe $15,000 on it, you are going to be responsible for paying or rolling over that additional $5,000 to your new vehicle if you do not have GAP coverage. With the coverage added to your policy, the insurance company would pay out up to what you still owe to the financial institute, giving you a clean slate when it comes to purchasing a new vehicle. Although there is a premium to have this coverage added to your policy, it can save you thousands of dollars down the road. Not only does it not make you have to pay the difference, but it doesn’t get rolled over to your next loan, which will include interest and end up making you pay more in the long run.

GAP Coverage is very inexpensive for the protection it provides and is something everyone should be aware of and take advantage of if it is an available option to you!  Have one of our Allied Insurance experts quote this for you when you call in.

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