auto insurance sold by an auto dealership or
finance company is $578.
Q. So why would anybody in their right mind pay $500 more
A. They donít know any better.
Imagine youíre in
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
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
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
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.