By definition, a gap in auto insurance occurs when your insurance does not cover the current value of your car. Once a new vehicle leaves a parking lot, its value depreciates rapidly. If you are in an accident that totals your car, the bank or financial institution requires you to repay the loan. Say your $24,000 car is now valued at $15,000, but when you total the car you still owe $20,000. Your auto insurance will only pay the Blue Book value. You must come up with the additional $5,000 from your own pocket or continue making car payments until the loan is paid in full. Gap auto insurance helps cover that additional balance so that your loan is paid off and you are able to replace your totaled vehicle as quickly as possible.
It is impossible to predict if or when you'll be in an auto accident. The accident might be your fault or someone elses. Regardless, many states have laws requiring car owners to have auto insurance at all times. Auto insurance is paid monthly, quarterly, bi-annually or annually. Failure to make a payment on time creates a lapse in your policy. Even if you make the payment a few days or weeks late but quickly catch up on payments, your insurance record is marked with a policy lapse. It's never a good idea to allow your auto insurance policy to lapse.
Not only does this mean that you may face penalties from your state for not having the required insurance coverage, but it also alerts insurance companies that you failed to make a payment and puts you at risk for higher rates. In addition, for the length of time you failed to pay your basic auto insurance or coverage to prevent a gap in auto insurance, you are not covered. Should you be in an accident during this lapse, you'll be in a messy situation because you'll pay for all damages, medical bills and legal fees out of your own pocket.
Experts agree that you should shop around for insurance policies every six months to a year. When doing this it is important to purchase a new policy, if applicable, before you call to cancel your other policy. Should your new policy begin after your old policy has expired, you would create a lapse that could be costly down the road. If you are being deployed in the military, experts still agree that you should keep your car insurance policy up to date. Even a stored vehicle can face costly damages.
Author: Jay Newman For more information, go to: http://lapsedautoinsurance.com/index.htm or http://lapsedautoinsurance.com/insurance.html |
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