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Bridging the "Gap" on Car Insurance

Posted on August 18, 2017

The vehicle you've financed may be worth less than what you borrowed


High vehicle prices, low down payment, long term financing, negative equity from previous car loan, sales tax, dealer fees, and warranty services financed into the loan can negatively impact you as all of these factors contribute to the value of the vehicle used to secure the loan being worth less than the outstanding balance on your loan.

wrecked car getting towed This unfortunate situation is fairly common, but has a dramatic negative impact when the vehicle is declared a total loss through collision, weather events like a serious hail storm, or theft. At this point, the insurance company will issue a check for the car’s current value, which in many cases, is not enough to cover the balance of the loan. Imagine it: you lose your car, you have to pay out of pocket to satisfy the lender, and still have to go buy another vehicle!

Guaranteed Asset Protection, or GAP, helps pay off your remaining loan balance if your vehicle is deemed to be a total loss.

GAP may not cover your entire deficiency balance, however, and protection can vary between providers. Extensions, late payments, previous damage not covered by primary insurance, the refundable portion of any extended warranty, and other items may not covered by GAP. Keep in mind, too, that GAP is associated with the financing of the vehicle, not the vehicle itself, so once the loan is paid in full, GAP is no longer valid. If you refinance a loan that had GAP, you will need to contact the administrator to see if you’re are eligible for a pro-rated refund and enter a new GAP agreement associated with the new financing.

On Tap Credit Union recommends GAP for our members who finance an eligible new or used vehicle, RV, motorcycle or watercraft that is expected to depreciate at a faster rate than the principal balance reduction of the loan. Coverage at On Tap Credit Union starts for as little as $299 for automobiles, with different pricing for RVs and water sport vehicles, and the cost of the GAP can be paid for in a lump sum or can be financed with your new loan.

On Tap Credit Union’s GAP coverage is offered through a third-party provider, but if you have GAP through us and find yourself needing to file a claim, you simply call our friendly and knowledgeable staff who will handle the claim process on your behalf. For added confidence, we offer a 30 day “free-look” period within which you can cancel for a full refund if you decide GAP isn’t a good fit for you. Even better, we offer $1,000 toward the purchase of your replacement vehicle after a total loss (when financed at On Tap Credit Union).

You never know what may cause the value of your vehicle to change, but you can know that you have extra financing protection to help ease your stress if you face the challenging experience of having your vehicle declared a total loss.

If you have a question about your current GAP coverage or would like to learn how it can benefit you, please contact us at 303.279.6414.