Find Gap cover Insurance For Cars Online.
Gap cover insurance for cars is an insurance product that covers you against the gap or shortfall created because the car has depreciated faster than the balance of the car finance and pays out if the car is declared a total loss by the comprehensive car insurer. A total loss in insurance terms is when the car is either stolen and not recovered or is damaged beyond economical repair as determined by the insurance company.
The acronym Gap stands for Guaranteed Auto Protection and is often referred to as shortfall insurance for cars.
Gap insurance for cars can only be taken out by people that have car finance and therefore also have comprehensive car insurance. Many insurance companies Australia wide that insure cars have Gap cover insurance for cars as one of the insurance products they sell. Lenders such as banks and finance companies like Gap cover insurance for cars as part of the finance package because it gives them extra security; especially on used cars.
How Gap cover Insurance For Cars works
If there is an accident with your car and the insurance company that has the comprehensive insurance on it declares the car as a total loss, the loan will be paid out regardless of what is owing to the lender. This is useful in the early years of car finance, especially if you borrowed the full amount; or close to it. The market value of the car determined by an insurance company will decrease faster than the balance on the finance due to its depreciation leaving you with a gap or shortfall to pay.
When you buy a car, you purchased it at a retail price, which is its highest value. The insurance company will pay out the wholesale market value, which can be thousands of dollars less, so you could actually owe the lender thousands on your loan after the insurance payout.
Benefits of Gap cover Insurance For Cars
There are many benefits to having a Gap cover insurance for cars policy including:
- Covers your financial exposure to a gap between what the market value insurance payout is and what you still owe on the finance if your car is written off or stolen.
- Protects your credit rating by eliminating the possibility of having to pay two loans; the balance of the old one and the new loan for the next car you purchase.
- The premium paid is a once off amount that can be financed and covers you for the complete term of the finance.
- Car finance lenders like to add Gap cover insurance for cars to the financed amount because they know if the car is a write off they will be paid out in full.
- Additional lump sum payment; usually in the amount of between $4,000 and $6,000 to cover any other expenses; or help fund a better car.
- Gap cover insurance for cars covers new and used cars Australia wide for a total loss, i.e. written off in an accident or stolen.
Who qualifies for Gap cover Insurance For Cars?
Anyone that has car finance on their car and has comprehensive car insurance cover; which is required by Australian law in any case, qualifies to have Gap cover insurance for cars.
Cost of Gap cover Insurance For Cars
As with any insurance product, premiums vary with different insurance companies so before taking out Gap cover insurance for cars it would be wise to compare car insurance quotes for Gap cover insurance for cars with several insurers. You will also notice by reading the product disclosure statement (PDS) from each insurance company that there will be different ‘extra amounts’ the insurer will pay out if your car is written off or stolen. Gap cover insurance for cars premiums are generally in the range of $2,000 depending on the level of cover you take out, which equates to around a dollar a day on a 5 year finance term, making it very affordable and gives you that extra piece of mind and could save you from financial ruin.