How do you avoid a financial loss when your car is totaled?

 

New and used car buyers are potentially losing thousands of dollars when their vehicle is totaled after an accident or theft.  Many do not know that they can acquire an additional insurance policy when they first purchase the car.

 

Some auto warranty providers believe the reason many drivers do not take out Guaranteed Asset Protection (GAP) Insurance from their selling dealer is their lack of understanding the benefits of these policies.

 

Almost a million cars are written off in the US each year and many drivers are left owing a lot of money to their finance company as the insurance payout is far less than the outstanding finance balance on their car loan.  On higher value used cars this could amount to a few thousand dollars, especially if the car was recently purchased.

 

GAP insurance pays the difference between the insured value of the vehicle and the outstanding finance balance.  Recently there was a situation where a very expensive luxury car was written off following an accident. The difference between the insurance pay out and the outstanding finance balance $13,000 because the car was only three weeks into its finance contract term.  Because the owner had taken out GAP insurance the policy paid out the difference and he was able to buy another car without any additional out of pocket expense.

 

Many used car warranties purchased with the vehicle have their own built Gap Insurance as the extended warranties are cancelable on a pro-rata basis.  This is just another reason that a used car warranty turns out to be a very smart purchase.