Guaranteed Secured Protection (GAP) (also known as GAPS ) was established in the North American financial industry. GAP insurance is the difference between the actual cash value of the vehicle and the remainder is still payable on financing (car loans, leases, etc.). GAP coverage is mainly used in new and used small vehicles (cars and trucks) and heavy trucks. Some finance companies and lease contracts require it.
GAP Insurance covers the amount of the loan which is the difference between the amount owed and the amount covered by other insurance policies. Some GAP policies also include deductibles. This coverage is marketed for loans with low down payment, high interest loans and loans with a term of 60 months or more. GAP insurance is usually offered by a finance company at the time of purchase. Most auto insurance companies offer this guarantee to consumers. GAP insurance is usually paid in advance and, for that reason, a person is eligible for a refund if he sells or refills their vehicle.
There are two ways to get GAP coverage. The first type is an insurance policy sold by a broker. The second type is a waiver agreement sold by Finance & amp; Insurance Manager. The first is governed by the insurance industry, the second is not regulated. In both cases coverage is usually the same and sold as a soft product through car dealerships. Coverage is usually financed along with rent/loan. Claims are subject to total loss. The total loss is usually determined by the third party company's primary insurance appraiser.
Exclusions for GAP insurance vary by country or state. Some exceptions include a maximum loss limit of $ 50,000 while others require a loan term of less than 84 months. GAP is an optional purchase; however, many US states require car dealers to offer GAP at the point of purchase. Other countries require insurance companies to offer GAP if clients request it. Countries such as Louisiana require that buyers sign a disclosure document as evidence. Although GAP is optional, some finance companies require GAP as a condition to obtain a loan. Truth in Lending Act excludes GAP premiums from financial costs if GAP is not required by creditors, premiums are disclosed in writing, and consumers provide written demand for insurance.
UK Gap Assurance Update
In September 2015, the FCA changed the way the Gap insurance premiums were sold by car dealerships in the UK.
Claim ratio for GAP insurance (amount paid compared to paid premium) is only 10% between 2008 and 2012, which means that only  £ 10.00 is payable for every Ã,  £ 100.00 paid in premium. The poor value for money given to consumers encourages the FCA to ask for the following:
- Make sure the dealer makes the consumer aware that other suppliers exist.
- Pause transactions within 4 business days.
Video GAP insurance
See also
- Insurance law
- Insurance in the United States
- GAP abandonment
Maps GAP insurance
References
Source of the article : Wikipedia
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