99% of the time, when you are in a finance office at a dealership, you are offered the opportunity to purchase GAP insurance. Many times the finance manager will include it in the contract without even asking, insisting that it is something that you need.

So, what is GAP?

When you drive off of a dealership lot in a new or used vehicle that you have just purchased, with the addition of sales tax and dealer doc fees, it’s very common that you drive off owing more on the vehicle then it is worth. This applies to new and used vehicles alike. This also means that if the vehicle is totaled in a car accident or is stolen, your auto insurance will only pay the amount that the vehicle is worth. What gap insurance does is covers the gap between what the insurance company will pay for the vehicle if it is a total loss and what you owe the finance company for your car loan. If it were not for gap insurance, you would have to pay the difference. Many people are under the impression that if they have car insurance that they have enough coverage, when in fact they are not in many cases.

Is GAP Worth it?

There are 3 instances in which GAP insurance would not be recommended.

  1. If you put down a sizable down payment to reduce the amount financed.
  2. If a large manufacturer’s rebate is applied to reduce the amount financed.
  3. If you get an exceptional price at or near the loan value of the vehicle.

Can You Cancel GAP?

Yes, you can and generally within 30 days of signing the contract. Read your contract. You can simply call the number on the receipt that the dealer provided you with and tell them that you want to cancel. In some cases, you may be required to go to the dealer to request that the GAP insurance be cancelled. In this case, make certain that you obtain either a copy of the cancellation form that is signed and dated, or have the dealer give you some type of proof that you requested that it be cancelled.

Where Does the Money Go for the Refund?

The GAP insurance company will not send you a check if there is a lienholder on the vehicle, unless you paid for the GAP insurance outside of your finance agreement. If it was included in your finance agreement, then the insurer will send a check to the lienholder. This will reduce the amount that you owe on the vehicle by whatever the total premium was for the GAP.

Some Car Insurance Companies Include GAP at No Cost.

It’s a good idea to check with your auto insurance company as some of the better car insurance companies include GAP insurance at no extra charge. In this case, it would be wise to cancel the GAP that you bought with your vehicle, as it would be useless as your car insurance company will cover the total loss including the amount owed on the vehicle.

Some Lenders Include GAP Automatically.

Some finance companies, including many auto lenders that cater to the subprime credit market, include GAP insurance at no additional cost as a part of the finance arrangement. This is to protect the insurance company from sustaining a loss should your vehicle become totalled. This can cause you to have no need for additional coverage and is a good example of why you should read your entire finance contract.

Hassle Free Auto Financing: http://www.FundMyVehicle.Net/

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Jason Lanier is a Platinum Author with over 250 published articles relating to auto finance.

Article Source: http://EzineArticles.com/?expert=Jason_Lanier

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Filed under: Gap Insurance

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