First things first:
What is GAP insurance?
GAP insurance, known as Guaranteed Asset Protection or Guaranteed Auto Protection, covers the difference of what you owe on your car loan vs. what the car is ACTUALLY worth. My insurance company called it ADV, or Actual Daily Value, what the car was worth on the actual day the accident happened.
GAP insurance is almost ALWAYS recommended when you buy a NEW vehicle. The minute you drive the car off the lot it loses %25-%30 of its value. It is no longer worth the $10K(generic number) you bought it for. It's now worth $7K. If you were to get in an accident, you car insurance would ONLY pay $7K, and it would be up to YOU to finance the rest. I hope you have an extra $3K laying around! Or you could continue making your monthly payments until the $3K is paid off. If you had GAP insurance, it would pay the dealership(or loan provider)the $3K.
GAP insurance is not always recommended on used cars because the used car MAY be worth more than the dealer selling price. It's up to you, the consumer, to verify. However the dealership may not tell you and STILL try to sell you GAP insurance.
What if I rolled over $5K(generic amount) from a trade-in. Does GAP insurance cover this amount?
MAYBE. I say this because it DEPENDS on the GAP Insurance provider and how much GAP insurance coverage they provide.
Everywhere I looked on the web stated GAP ins. DOES NOT cover ANY amount that is rolled over from another vehicle. However I found this to be untrue. This all DEPENDS on WHO the GAP ins. provider is and how MUCH they cover.
My story is as follows:(generic numbers used)
Traded in my truck with $5K rolled over into a new Honda, because I had negative equity in the truck. Basically they tacked on the $5K to the loan amount. So instead of owing $10K for the car, I owed $15K. I opted for the GAP insurance since it was a new car. Unknown to ME, the GAP Ins. provider was NOT in-house(Honda), it was a third party provider with whom Honda sent their business to. I did not find this out until after the accident happened, almost a year later.
One year later, after making all payments, car was totaled. Called my insurance provider, they got everything started with my claim and instructed me to contact the GAP provider so I could start the claim process with them. Again, I have never dealt with GAP insurance providers before. I contacted the dealership, as I had in-house financing and informed them I needed to start my GAP ins. claim. They informed me, to my surprise, that I needed to contact the GAP ins. provider to do this. After a few calls, I was able to get the number from the dealership and contacted the GAP insurance provider and got the ball rolling.
A few things I learned at this point:
- YOU must start the GAP insurance claim process. It does NOT automatically start, they are not notified, and in fact they purposefully DON'T want to know. Why? Because there is a time period for the entire process to be finalized. If YOU FAIL to initiate the process and complete it during this time period, the GAP ins. provider says "oh well, your loss!". They don't pay the claim and YOU have to pay!
- DEPENDING on the GAP ins. provider, they can cover %100, %125, OR %150 of the amount. So for a difference of $3K(owed vs. actual value) they may cover $3000(%100), $3750(%125) OR $4500(%150)
- The GAP ins. provider has a LONG list of required items. This includes copies of: sales contract, GAP Insurance Amendment(GAP ins. contract), proof of payments(monthly payments), THE WINDOW STICKER!!!, pay-off check from your insurance company, address of insurance company agent, proof of how the insurance company came up with the actual value of the vehicle, and a long list of other items from the insurance company.
It's almost overwhelming! All of this had to be shipped to their claims office within a specified amount of time, OR they would not pay the claim. Fortunately for me, my insurance agent was VERY good and was able to get everything I needed to me within 2 days.
The bottom line to all this is that IF you buy a new vehicle and purchase GAP insurance, MAKE SURE that it will cover ANY ROLL-OVER amount from a previous vehicle! Fortunately for me, MY provider covered %150 of the owed amount, which covered my roll-over. Ask WHO the GAP ins. provider is and CALL them to find out what their coverages are.
On another note, I was amused to find that our Honda actually APPRECIATED in value by $1000!
Edited by Polaroy2, 23 April 2012 - 12:15 AM.