Gap Insurance News
From the Cincinnati
Enquirer Sunday, May 05, 2002
Closing the gap on car insurance
Extra protection gets more popular
By Jenny
Callison
Enquirer
contributor
Suppose you've just
bought or leased a new car, and you're involved in
an accident in which your new vehicle is totaled. No
problem, you say. You have insurance. Unfortunately,
your auto insurance may be inadequate against this
kind of loss.
An insurance company's determination of
your car's cash value may be a few thousand dollars
less than the amount you still owe on your car loan.
If you're leasing, you will owe all your remaining
payments plus the residual value of the vehicle.
That's why many experts recommend
purchasing gap insurance.
Gap insurance pays the difference between
what your insurer reimburses you for your totaled
car and what you owe. It's becoming increasingly
popular as lenders require less from buyers and in
some cases finance more than the purchase price of a
new vehicle.
“If somebody takes a long-term lease,
more than the car's worth, gap insurance makes up
the difference between what the car's worth versus
what the debt is to the leasing company,” explained
Oxford independent insurance agent Tom Fey. “We do
write gap insurance for leases, but what we're
finding out more and more is that more leasing
companies include it with their lease.”
While a few major auto insurers such as
State Farm, Geico and Nationwide have stopped
writing these gap endorsements, a number of
independent agents do.
“Unless somebody indicates that they have
gap insurance, typically we suggest they add it,”
said Stephen P. Mueller of Camargo Insurance in
Madeira. “Some lenders do include gap coverage with
the loan. It's a very good thing for the client.”
When you drive your shiny car off the
lot, depreciation has already set in, plus you're
out the one-time fees you paid at purchase.
According to Insure.com, an industry web
site, car manufacturers calculate that a car loses
between 10 and 15 percent of its value within the
first year. If you've paid $18,000 for your new
vehicle, that means it's soon worth only $15,300 to
$16,200. Add to the value-price gap that extra $1000
or so you paid in one-time fees at purchase.
Even so, gap insurance isn't needed in
all situations. If you are purchasing a new car and
have made a substantial down payment, and if you
plan to pay off the loan within two or three years,
your loan balance isn't necessarily out of whack
with the vehicle's value. And some cars hold their
value better than others.
There are other factors to consider when
deciding to purchase gap insurance, said Biff
Arnold, finance manager for Jake Sweeney
Chevrolet-Imports in Tri-County.
“Look at how you use your car,” he
advised. “Some people, like salesmen, put 30,000
miles a year on it. That's going to affect the
depreciation.”
Because a lessee's financial
vulnerability is often greater than a purchaser's,
more automobile finance institutions are including
gap coverage in their standard leasing contracts.
Mr. Arnold said that GMAC includes it with all lease
contracts, but that such coverage is optional for
new car purchases.
Ralph Sells, sales and leasing manager
for Performance Lexus in Deerfield Township,
cautions buyers to check the provisions in gap
coverage, since it can differ from one provider to
another. Like GMAC, Lexus leases offer to include
the coverage but purchasers who want it are
encouraged to check with banks or insurance agents.
Car dealers, insurance agents and lenders
have seen a distinct increase in demand for gap
insurance over the last several years. As some
insurance providers have backed away from the
product, more dealers and lenders have stepped
forward.
“We have offered it only within the last
year, and demand has increased as more people have
become aware that it exists,” said Beth Hinkle, loan
officer with Sharefax Credit Union.
Costs of gap insurance vary, as do
provisions. Some policies will pay only a percentage
of the “gap” they are filling; others are lavish in
their reimbursements. Policies may be payable
monthly, semi-annually or annually. Some lenders,
like Sharefax, charge a one-time fee that covers the
term of the loan or lease.
In addition to understanding the
provisions of his gap policy, a purchaser should
consider dropping it when his vehicle's depreciation
has leveled off and its value is roughly equal to
what is still owed.
|
|
|
July 8, 2006,
9:03PM
Police want car thieves to take their
bait
Shreveport will
use wired vehicles to catch criminals
Associated Press
SHREVEPORT, LA. -
Cars donated by insurance companies across the state will
soon be put out as bait for Shreveport's thieves. They'll be
left out on the street as soon as officers can be taught how
to use their high-tech tracking equipment.And the hidden
camera and tape, and the remote-control engine override and
door locks.Police Chief Mike Campbell announced the
department's plans for "bait cars" Friday. He's hoping
they'll cut the city's car-theft rate, which has risen 15
percent from last year.
"I think it's going to make a major impact on our
vehicle-theft problem," Campbell said.
Detective Brandon Ortiz said the bait cars could be anything
from 1980s model Chevrolet Caprices to brand-new Cadillac
Escalades.
When a bait car is stolen, dispatch officers will be
notified through a computer alarm, and they will send patrol
officers to the scene, Ortiz said.
Campbell would
not specify how many bait cars would be used in Shreveport,
but Charlie Peters, a special agent with the National
Insurance Crime Bureau, said he hopes more will be donated.
"Eventually we'd like to have a whole fleet of vehicles,"
Peters said.
The National
Insurance Crime Bureau, a support agency for law enforcement
and insurance providers, helped set up the Shreveport
program.Campbell said he expects the cars to be in use in "a
couple weeks."
Wednesday, October 13, 2004
GAP coverage desirable for long-term car loans
By PAMELA YIP
The Dallas Morning News
Guaranteed Auto Protection
insurance typically is purchased for a one-time premium
when you buy your vehicle, or it may be rolled into the
amount of your loan.
It will cost you anywhere from $100
to 4 percent or 5 percent of the vehicle's sticker price,
said Jose Montemayor, Texas insurance commissioner.
You buy such insurance because you
want to avoid a situation in which you are still paying
off your car, even though the car is gone - either totaled
or stolen.
With today's long-in-the-tooth loan
terms, GAP insurance may become a more integral part of a
financing package.
At one point, the standard auto
loan term was 24 months.
"Now we have 60- to 72-month
terms," said Bill Wolters, president of the Texas
Automobile Dealers Association.
If you lease your vehicle,
depending on how the lease is structured, GAP insurance is
even more critical because the "residual value" - the
leasing company's prediction of what the car will be worth
at the end of the lease - may not be in line with the
actual market value of the vehicle.
What is more, a lease assumes a low
or no down payment, and consumers wanting to lease often
have no trade-in.
In a lease, if your car is totaled,
you owe the difference between what you have paid and what
you owe on the balance of the lease.
Many leasing companies require the
GAP coverage to protect the financial interest of the
lessor, said Paul Taylor, chief economist of the National
Automobile Dealers Association.
If you have GAP insurance and your
car is totaled or stolen, follow the requirements set by
your insurance company.
"Some companies require you to
continue making loan payments on your totaled car until
the money from the GAP insurance is paid out," according
to Edmunds.com.
(Jan. 16 2006)
Michael Geeser, Consumer Editor
GAP
Insurance Is Invaluable If Your Car is Totaled
(Jan. 16) -- A national study shows one of every three
Americans suffers the total loss of a vehicle at some point during their
lifetime. If a car is lost just after it's been purchased the owner can be out
a lot of money. That's why auto dealers and insurance companies offer GAP
insurance --a product that could bail you out of a lot of
trouble.Even the nicest cars lose their value as
soon as they are driven off the lot--it's called depreciation.
Kirk Alexander of
Findlay
Toyota explains it this way: "As soon as you drive off my
lot, your back tire is gonna hit the last bump in our driveway, now look in
your rear view mirror because the trunk's gonna open, a bunch of money is
gonna fly out, and your trunk is gonna close."
Not really, but the truth is that new car has now
become a used car. If you owe, for example, $20,000 on it, and the car is
stolen or damaged, your insurance company is only going to pay what its worth.
"That difference is what they call the gap," says Alexander.
He also says a lot of car buyers don't see the value of
GAP insurance, but he says those are the same people who probably haven't had
their car stolen or damaged.
Chances are they soon will: a national study shows one
out of every 19 drivers will have a total loss of a new car due to collision,
while one in every 20 drivers will experience an unrecoverable theft. Bob
Feldman is the Secretary-Treasurer for the
Nevada Insurance Council. He says GAP insurance is a good
idea, but that consumers should shop around before buying it from the dealer:
"Some of the GAP insurance is extremely expensive--they charge about three
times what it's worth, so I would suggest people shop with their own insurance
companies, a larger insurance company can offer GAP insurance at a reasonable
cost," says Feldman.
He also says be careful about what costs you tack on at
the dealer: "The more things you purchase at the car dealership--more types of
insurance, credit wise, disability, gap insurance, extended warranty--the more
of those you finance into your loan, the more chance you'll be upside own in
your loan."
So the best advice is to shop around.
Here's a good way to know if you need it: iIf you've
made a small down payment, it's a good idea to get it. If you've made a big
down payment, you might not need it. Also check with your insurance agent to
see if the company carries it: Farmers does, Allstate doesn't.
Car
Dealers Sell GAP Insurance to Fill Gap Between How Much You Owe and
What The Car is Actualy Worth
NEW YORK December 14,
2003; The AP reported that
car dealers
are selling insurance to fill the gap between the value of your car
and how much you owe.
Once almost exclusively
used in lease contracts, GAP insurance is creeping into more
traditional
car loans.
GAP -- which stands for guaranteed auto protection -- promises to
pay the difference between your vehicle's value and your loan
balance if your car is totaled or stolen.
The policies help
address a dilemma that
car buyers
are increasingly finding themselves in, dealers and insurance
executives said. Thanks to generous incentives, no-money-down deals
and long-term loans, more consumers are finding themselves "upside
down" -- industry parlance for owing more than the vehicle is worth
-- for a longer period. That means that if their car is stolen or
totaled in an accident, they may actually have to write a check to
the bank.
"There's a yawning gap that's
developing between the actual cash value of the car and what you
still owe on it," said Bob Hartwig, economist at the Insurance
Information Institute.
Needing GAP insurance can
mean you might be stretching to own more car than your finances can
handle. Or, you may have been tempted to take on a longer-term loan
to reduce your monthly payments -- a strategy that has its downside
since you'll be carrying the payments as the car's value dwindles.
Sales of these policies
are growing and becoming an increasingly important profit center for
dealerships
and specialty insurers.
For example, City Toyota of
Daly City, Calif., sells the GAP policies for between $395 and $495
which would be added to the cost of a car, according to owner Jim
Wardy.
Allstate Corp. entered the
business when it acquired American Heritage Life Insurance Co. and
its First Colonial Insurance Co. division in 1999. At First
Colonial, which starting underwriting GAP policies for dealerships
about three years ago, sales now make up more than 60 percent of its
business, up from less than 5 percent two years ago, said president
Tony Wanderon.
The financing and
insurance arms of General Motors Corp., Ford Motor Co. and
DaimlerChrysler AG offer GAP policies through their
dealers,
typically capped at about $500. Sales of GAP policies offered
through GMAC Insurance, for example, have been doubling each year
and are currently on an annual pace to exceed 60,000 contracts a
year.
"The product itself is
probably the second most popular purchased product behind extended
service contracts over the last two years," said Dean Grant,
divisional manager at American Financial & Automotive Services Inc.,
a League City, Texas, seller of GAP insurance to dealerships and
banks. Dealers typically sell its GAP policies on about 37 percent
of the contracts they finance, an increase of almost 30 percent over
the last two years, he said. Payouts have also increased: The
average GAP claim is about $2,200, up from $1,900 two years ago.
For the buyer, prices
of GAP policies can vary widely, depending on state regulations, the
vehicle type
and loan amount. Many dealerships sell the policies for about $500,
but you may also be able to find better deals at your local credit
union or insurance carrier.
If you own a car with coveted
vehicle parts or are a reckless driver, then GAP policies could make
sense for you -- especially if you frequently trade in your vehicle
and tend to roll over existing loan balances into new loans, experts
said.
But the policies aren't for
everyone. It's important to think through the probability that
you'll need the coverage. Keep in mind that these policies typically
pay out only if your vehicle is totaled, not just damaged.
You may not need GAP if you
put down a large enough down payment. If you put down 20 percent on
a car, you're going to usually be ahead of the depreciation curve.
Gap insurance policy at Van
Chevrolet confuses consumer
Dave Cherry
Call 12 for Action
Sept. 20, 2006 05:53 AM
Consumer problem with gap insurance
We have an interesting consumer case dealing with
the confusing issue of gap insurance. It protects
consumers who finance their vehicles. If your
vehicle is stolen or “totaled” in an accident, gap
insurance pays the difference between what you owe
on the vehicle and how much the vehicle is
actually worth at the time of loss. This next
consumer thought she was properly covered and only
found out the truth after it was too late.
"It was a Chevy Monte Carlo."
Bought in Kansas City, Kristy Blackhorse forgot to
buy gap insurance from the dealer there. After
moving to Scottsdale she went to Van Chevrolet.
"He quoted us $299. We said okay, paid the $299
and left with a gap addendum."
A year later the car was stolen. Her regular
insurance company paid what the car was worth. The
remaining $10,000 owed would come from the gap
provider. At least that's what Kristy thought.
"They pretty much said we don't have any record on
file of a gap policy."
Kristy says Van told her the gap insurance
application she signed a year before had been
denied. It was the first she'd heard of it.
"And we should have known we were denied coverage
when we didn't receive an insurance declaration in
the mail."
But she did have the addendum, signed by a Van
employee, showing the amount paid. Kristy says Van
refused to budge- even returning her original
premium payment. Instead of cashing the check--
Kristy Called 12 for Action. Our volunteers found
out what really happened. Van told us its policy
is to only offer gap coverage on vehicles it
sells. The Van salesman had made a mistake in
offering gap coverage on Kristy's Kansas-bought
car. She hadn't been denied at all. The
application had never been processed! Now
realizing its mistake, Van paid off the remaining
$10,000 owed on the car. Many dealers have similar
policies about gap insurance, so, Kristy has one
last reminder about gap coverage.
"Make sure you purchase the gap policy when the
vehicle is purchased."
And call 30 days later to confirm your policy is
in place. That's another Call 12 for Action- Case
closed.
So remember, buy gap coverage from the dealer who
sells you the vehicle, or better yet, get it
directly from your regular insurance provider.
Helping Kristy brings Call 12 for Action's total
consumer savings for 2006 to $522,446!
If you have a consumer problem, we'd like to help.
Our volunteers are available Monday through Friday
from 11am to 1pm. The number is 602-260-1212, just
give us a call.
With vehicles depreciating as soon as you drive
them off the lot, gap coverage has become a
necessary evil for many who finance their
purchase. However, you don’t need the coverage
once the balance you owe on the vehicle is equal
to or less than its current “blue book” value. If
you’ve purchased gap through your regular
insurance provider, make sure you contact your
agent and drop the gap coverage from your policy
at that point. Otherwise, you are paying a premium
for coverage you don’t need any longer.
|
|
Please have the date your car or
truck was purchased, total purchase price of the vehicle, amount
financed, annual percentage rate (Not to exceed 12.5 APR) name
and address of Lender, vehicle year, make, model.
Gap Insurance is available in all states except:
CT, LA, NH, NM, NY, VA, VT, WA
 |
For your
convenience when ordering coverage please have
the following information available;
Date your car or
truck was purchased
Total purchase price of the vehicle
Amount financed
Annual Percentage Rate (Not to exceed 12.5% APR)
Name and address of Lender
Vehicle year, make, model
Vehicle I.D. Number (Note: VIN numbers are 17
digits long |
