Insurance companies vs. car dealerships for guaranteed asset protection, or GAP policies, which cover the difference between a vehicle’s loan balance and its cash value if the vehicle is stolen or totaled.
Dealer Says: No deductible on our Policy
There is no deductible on most gap policies, however the primary insurance policy has a deductible. GAP on your insurance policy can cost $8 – $22 per year for three to four years. GAP sold by the dealership will cost $600 – $1,200 and you’ll pay interest on that as it is added to your loan. GAP at the dealership is sold by a third-party insurance vendor. In the event of a total loss, you may be in the middle of a battle between your insurance company and the dealer’s GAP company. If your GAP is with your own insurance, this is all settled in house without delays. So yes, your deductible may be waived with the dealership’s GAP, but is it worth as much as $1,500.00 when you may pay as little as $32 through your insurance policy?
Dealer Says: No Impact on Insurance Rates When You Make a Claim With us
You cannot have a GAP claim without a total loss claim. If you have a total loss, the claim is already filed on your primary policy and a GAP claim is irrelevant. The impact on future insurance rates will be the same for a total loss, whether you have the GAP coverage through the dealership or your own insurance.
Dealer Says: No Risk of Cancellation Due to Claim on Their GAP Coverage
As above, the GAP claim is irrelevant, regardless of where the GAP coverage lies and some states do not allow a “cancellation” due to claims.
Dealer Says: You Have the Freedom to Switch Insurers if You Choose Their GAP
GAP is not needed for the life of the loan. You can remove gap coverage from your insurance policy anytime you want. It is only needed until you no longer owe more than the vehicle is worth. In most cases, gap is only needed for the first three or four years of the loan and some carriers will allow GAP if you have it on a previous policy.
Dealer Says: Insurance Companies Will Most Likely “Fix” Total Loss Vehicles
GAP has nothing to do with the cost of repair versus the cost of replacement. The insurance company will only fix a vehicle if it is safe to do so and if the repairs do not meet or exceed a threshold of repair cost to Actual Cash Value.
Everyone should verify laws within their own state, read all information available, and ask plenty of questions in order to make an informed decision regarding GAP coverage for themselves.