In the U.S., every single driver must have car insurance. And most of us drive around with the confidence that we have enough insurance to protect us in case of an accident.
Still, almost 97% of all drivers are not protected well enough... and they don't even know it. What I mean is this.
Let's say you get into an accident that is bad enough that your insurance company says your car is a "total loss." Or, maybe your vehicle gets stolen. After a few weeks, your insurance company sends you a check.
When you see how much it is, you are shocked. It's a lot less than what you still have to pay on your car. You might ask, "How can that be?"
Well, like most policies, yours has this short clause buried somewhere in all that legalese -
"If the car is totaled, the policyholder will get the car's actual cash value, less any deductible."
Did you catch the three words that are very important in that sentence? "Actual cash value" are the three words.
Actual Cash Value means that you'll get a check for...
Not "What you owe," but "What it's worth."
That's a nasty little surprise, isn't it?
And, like most people, you owe a lot more on the car or truck than it is worth. If your car was totaled today, how much would you owe your bank or credit union?
So, how do you get out of this?
Well, add a "rider" to your policy or buy a separate "rider" when you buy a new or used car.
If you have renters or homeowners insurance, you may have heard of a "rider." If you have expensive things like fine jewellery, you need to add a rider to your homeowner's policy. The reason is that insurance companies won't cover those kinds of things under a normal policy.
So, you pay an extra $5 or $6 a month for the rider to cover these things completely.
Whenever something happens to the jewellery, it is replaced.
GAP Insurance or GAP Protection is a rider for your car or truck. It's the same as the rider for your home, but it only covers cars, vans, trucks, and SUVs.
It talks about what you owe, not what it's worth.
No matter what happened, if it was stolen, burned, in an accident, flooded, hit by a tornado, vandalised, or destroyed by a hurricane, it would be covered and paid for in full.
You can keep yourself safe in four ways.
- Get Gap Insurance from the dealership where you're buying the car.
- Put down at least 20%-30% of the price of a new or used car to close any gap;
- Buy a "Rider," also known as GAP insurance, from your bank or car insurance company;
- Get gap insurance from a different company;
Each of these is a good way to keep yourself safe. Whether you're about to buy a new car or truck or bought one within the last two years or so, make sure the "gap" between what your car is worth and what you still owe on it is covered.
