Andrew Harmon


 

 

How to Save $500 on Gap Auto Insurance

by Sam Streubel

The average price for gap auto insurance sold by an auto dealership or finance company is $578.

Q. So why would anybody in their right mind pay $500 more they should?

A. They donít know any better.

Imagine youíre in a car dealership and youíve just purchased a brand new car. Youíre sitting there with a self satisfied smile on your face that lets everybody in the showroom know you just brought the salesman to his knees with your finely honed negotiating skills.

Next you go see the finance person to arrange a loan. This is where youíre casually informed that if you wreck your beautiful new car during the next year or two youíre going to have fork over maybe five grand because the car will be worth that much less than what you still owe the bank.

Lucky for you the finance guy has a tailored made solution to the problem. For a measly $578 one time fee you can purchase a gap policy that protects you from a potential shortfall, up to $5,000, if you owe the bank more than the car is worth when that bus hits you.

Of course youíre going to say, sure, go ahead, because youíre afraid of losing your shirt and, by the way, did I tell you the premium could be rolled right into the loan?

On one hand, youíre relieved to know the value your asset is protected, but on the other hand youíre asking yourself why it had to cost so much.

Well, it doesnít. But who knew that there was even such a thing as gap insurance much less how much itís supposed to cost. The problem is not with you, but with the major insurance companies and their brokers.

The reason you donít hear anything about gap from your insurance agent is that it isnít exactly a big money maker. With an average gap endorsement costing around $35 a year, there isnít a lot of profit incentive to buy 30 second spots on American Idol.

Besides the price, thereís another difference between the gap insurance sold by a car dealer and the policy rider sold by a name brand gap insurance provider. When you buy gap from a major insurer you can cancel the rider as soon as the loan balance and value of your car reach parity, usually within the first two years of ownership.

With dealership gap insurance, the coverage is spread out over 60 months and cannot be canceled for a refund, whether you need it or not.

 

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