Gap cover is a short-term insurance product that helps protect you from medical expense shortfalls. These include doctors charging more than the medical aid rate for treatment and hospitals charging co-payments for operations.
It works alongside your major medical policy to pay a lump sum benefit for covered expenses. It’s a great option for people who have high deductibles.
It covers the difference between what you owe and what your car is worth.
Gap cover is a type of car insurance that pays the difference between what you owe on your loan or lease and the actual cash value of your vehicle in the event of a total loss. It’s designed to protect you from a financial hardship if your car is stolen or totaled, and it can be added to your policy at any time.
It’s not mandatory, but it may make sense for some drivers. You don’t need to get gap insurance if your vehicle is brand new, or if it’s a high-end model that holds its value well.
When you finance or lease a vehicle, it depreciates quickly. If you made a small down payment or financed a high-interest rate, you’re likely to be upside down (underwater) on your loan soon after you drive it off the lot.
If you’re upside down, your insurance company will pay out a lower amount than what you owe on the vehicle — a gap that can be thousands of dollars. If you don’t have gap insurance, you’ll have to come up with that money yourself or take out another loan to replace your vehicle.
You can determine your car’s worth by visiting websites like Kelley Blue Book or Edmunds to compare it with the balance on your loan. However, you’ll have to check it periodically to make sure your loan balance is less than the market value of your car.
In some cases, gap insurance might be worth the cost because it can help you avoid a costly financial hardship after an accident. It’s especially important if you’re financing or leasing a vehicle that depreciates quickly, such as a used car.
It’s also a good idea to get gap insurance if you plan on making payments on your vehicle for a long time, like more than five years. If you have a short term loan or are only paying off your car in a few years, it’s not likely to matter as much.
The CFPB says that gap insurance must be included in the contract of sale if the lender wants to require it. So if you’re buying or leasing a vehicle from a dealership, ask to see where it’s written into the sales contract.
It is not mandatory.
Gap cover is not mandatory for all drivers, but it can be a useful addition to your existing insurance policies. It provides extra coverage when your policy is underfunded, which can reduce your out-of-pocket expenses and increase your access to healthcare.
Gap insurance is also known as guaranteed asset protection (GAP) and is a form of short-term insurance that helps cover the difference between what you owe on your car and what it is worth. It is typically an add-on to your auto insurance policy and can be purchased at the dealership, through your bank or as an independent product.
A gap plan can help cover the cost of a replacement vehicle in case yours is totaled or stolen, but it does not pay for repairs. Like other forms of insurance, gap cover is only effective if you have comprehensive and collision coverage.
It can also be helpful if you are a new car owner and have a small down payment. However, if you owe more than your vehicle is worth, it might not be the best use of your money.
The most important thing to remember about gap insurance is that it is only applicable if you have a loan or lease on your car. Purchasing it as an add-on to your existing insurance plan is usually the most cost-effective way to get the protection you need.
While the name ‘gap insurance’ may be confusing, it is a relatively simple policy that helps to protect you from negative equity, or being unable to sell your vehicle for more than you still owe on it. It covers the difference between the depreciated value of your vehicle and the remaining balance of your loan or lease.
As long as you have a valid claim and your medical aid scheme or health insurance policy covers the cost of your accident, then you will receive a check to cover the gap between what your insurance pays and what you actually owe. Using this to cover the cost of a replacement vehicle or paying off your mortgage loan is an excellent example of the power of insurance, and gap cover is one of the most useful options available.
It is not required by law.
Gap cover, also known as guaranteed asset protection insurance (GAPI) is a form of extra coverage that pays the difference between what you owe and what your car is worth. It’s an optional add-on for drivers who have loans or leases on their cars.
GAP covers the difference between the outstanding loan balance and what your car is worth in the event of a total loss, or if you lose it in an accident. It also pays the difference between your insurance company’s settlement amount and the deductible you may have on your primary insurance policy. In addition, it can help with negative equity, which occurs when you owe more on your car than it’s worth.
Whether or not gap cover is necessary depends on a number of factors, including your situation and the term of your loan or lease contract. For example, if you have a long loan term, your car’s value will depreciate more slowly than if you had a shorter one.
This means that you might not need it as much as people who have a short loan term. However, it’s always a good idea to keep your loan balance below the actual cash value of your car to prevent negative equity.
If you’ve prepaid for gap coverage, you may be able to cancel it before the end of your loan or lease. You’ll want to talk to your auto insurance company and find out how they handle removing prepaid coverage from policies.
It’s a good idea to review your insurance policy and the terms of your lease or loan agreement before making any decisions about your gap cover, as some lenders and insurers have different processes for adding or removing coverage.
If you’ve recently purchased a new car, gap cover can provide peace of mind that your finances won’t be in jeopardy if your vehicle is stolen or totaled. But if you have an extended loan term and are worried about your finances, gap cover might not be a wise decision. It’s better to know your options than be caught without any coverage when you need it most.
It is not available to every driver.
It may seem like a no-brainer, but gap cover isn’t available to every driver. Only those with the financial means to put down a significant down payment on a new vehicle can qualify for the full GAP coverage. It’s also not available to drivers who lease a car or have a sizable outstanding balance on their existing auto loan.
It is no secret that newer vehicles depreciate in value much faster than older cars. This means that a vehicle can be significantly more expensive to own than you originally thought, especially when the time comes to sell or trade in for a new model. That is a good reason to consider all the options before making the leap of faith. It’s also important to remember that you can choose to do without gap insurance if your lender or leasing company offers it. The best way to find out if you’re eligible for it is to speak with your insurer or dealership about the vehicle you’re thinking of buying or leasing. The good news is that it won’t cost you a fortune to add it to your policy. The bad news is that it’s not for everyone and you will probably be the only one who has to deal with the consequences if you do get into an accident.