LOUISVILLE, Ky. (WDRB) — Auto insurance rates are up sharply the past three years. As a result, many drivers are opting out of optional coverage.
If your car was totaled, how much would your insurance pay you? Many drivers are learning the answer is: not enough.
One man’s 2004 Toyota Avalon was stolen from a downtown parking spot and found two days later, stolen and wrecked.
He still owed money on the loan, and his insurance company told him they wouldn’t pay it off.
Why? Because he didn’t have GAP insurance, or “guaranteed asset protection.”
In the event a car is stolen, or totaled, the optional insurance covers the “gap” between what you owe and its actual cash value.
GAP insurance is very popular with today’s longer loans because it protects you if you still owe a lot of money on it.
Otherwise, you might have to write your lending bank a check after the car is wrecked.
Say you bought a car for $20,000, but insurance values it at $15,000. If you wreck it, you still have to pay $5,000.
GAP insurance would cover that extra bit.
It costs on average $100-$150 a year, but you may only need it for a short amount of time.
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Based in New York, Stephen Freeman is a Senior Editor at Trending Insurance News. Previously he has worked for Forbes and The Huffington Post. Steven is a graduate of Risk Management at the University of New York.