GAP Coverage

There's nothing more exciting or memorable for a vehicle owner than the day he or she acquires a brand new vehicle. Unfortunately, if the vehicle is in an accident and a total loss occurs, this great day can come to a screeching halt. Unexpected problems arise and there is often a lack of funds to cover this unforeseen loss. In addition, when the insurance claim is settled, vehicle owners are faced with the reality that they owe more on their auto loans than they were compensated by their insurance companies.

This article will shed some light on the importance of GAP Coverage and the exposures that vehicle owners and leasers can be left with if not protected properly.

An article published by the Wall Street Journal (October, 2002) pointed out that an automobile valued at approximately $19,440 (sticker price) and traded within two years will only retain a trade-in value of $8,302, which indicates a 57% depreciation. Statistics have shown that 40% of the time a consumer trades in a car they owe more than the car is worth. This results from the fact that the loan amount on most cars decreases only slightly in the first two years and is known as being "upside down".

The solution to this problem is that coverage can be purchased under the Personal Auto Policy (PAP) or the Business Auto Policy (BAP). This coverage is called Guaranteed Auto Protection (GAP) and can be added to either the PAP or BAP for a reasonable amount. This coverage fills the gap between the amount owed on a loan and the actual cash value (ACV) settlement paid by the insurance company for a total loss situation. GAP is available for either financed or leased vehicles. Auto dealers often offer this coverage at the time of the lease or purchase, however comparing their price to the cost under the PAP, the dealer's is usually significantly higher.

Any company that is serious about managing people effectively must get serious about managing risk. Mismanagement of employee safety is a risk you do not want to take.

In the event that you had a total loss to "your covered auto" and you carried GAP coverage, this coverage would help to pay for:

any overdue lease or loan payment(s) at the time of loss;
financial penalties imposed under a lease for excessive use;
abnormal wear and tear or high mileage;
security deposits not refunded by a leaser;
costs for extended warranties;
credit life insurance;
health, accident or disability insurance purchased with the loan or lease; and
carry-over balances from previous loans or leases.

This will help eliminate the potential for significant out of pocket expenses especially for someone who has entered into a long-term auto lease situation.

Provided by: HRTutor.com and The Human Equation Email this article GAP Coverage By: Gail Mendella
There's nothing more exciting or memorable for a vehicle owner than the day he or she acquires a brand new vehicle. Unfortunately, if the vehicle is in an accident and a total loss occurs, this great day can come to a screeching halt. Unexpected problems arise and there is often a lack of funds to cover this unforeseen loss. In addition, when the insurance claim is settled, vehicle owners are faced with the reality that they owe more on their auto loans than they were compensated by their insurance companies. This article will shed some light on the importance of GAP Coverage and the exposures that vehicle owners and leasers can be left with if not protected properly. An article published by the Wall Street Journal (October, 2002) pointed out that an automobile valued at approximately $19,440 (sticker price) and traded within two years will only retain a trade-in value of $8,302, which indicates a 57% depreciation. Statistics have shown that 40% of the time a consumer trades in a car they owe more than the car is worth. This results from the fact that the loan amount on most cars decreases only slightly in the first two years and is known as being "upside down". The solution to this problem is that coverage can be purchased under the Personal Auto Policy (PAP) or the Business Auto Policy (BAP). This coverage is called Guaranteed Auto Protection (GAP) and can be added to either the PAP or BAP for a reasonable amount. This coverage fills the gap between the amount owed on a loan and the actual cash value (ACV) settlement paid by the insurance company for a total loss situation. GAP is available for either financed or leased vehicles. Auto dealers often offer this coverage at the time of the lease or purchase, however comparing their price to the cost under the PAP, the dealer's is usually significantly higher. *Any company that is serious about managing people effectively must get serious about managing risk. Mismanagement of employee safety is a risk you do not want to take.* In the event that you had a total loss to "your covered auto" and you carried GAP coverage, this coverage would help to pay for: any overdue lease or loan payment(s) at the time of loss; financial penalties imposed under a lease for excessive use; abnormal wear and tear or high mileage; security deposits not refunded by a leaser; costs for extended warranties; credit life insurance; health, accident or disability insurance purchased with the loan or lease; and carry-over balances from previous loans or leases. This will help eliminate the potential for significant out of pocket expenses especially for someone who has entered into a long-term auto lease situation.
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