Gap Insurance Coverage Protect Owners Of Autos, Homes
By Mike Heuer
Most people quite readily understand the need to obtain liability insurance coverage to protect themselves and their homes and cars against potential financial calamity in the event of an accident of other unfortunate event that injured someone or caused damage to their property. In such cases, liability insurance would cover the costs of repairing or replacing the damaged goods or pay for medical treatment for any injuries people might have sustained.
While most people not only understand the need for liability insurance coverage, the need for gap insurance coverage often is lost on them, and many wind up owing an ungodly sum of money when their insured properties or cars or stolen or otherwise declared a total loss by an insurance company after a suffering a loss due to a covered peril. But general auto protection works kind of like liability insurance coverage in that it protects the owner of a vehicle or other insured property against the potential immediate liability of owing a lender for the difference between what is owed on a financed car, truck, van or other vehicle or other kind of property that is worth less in cash value than what the owner owes on it to a lender. In such instances, a total loss could leave the owner on the hook for potentially tens of thousands of dollars payable on demand and at a time when such a debt could be a truly crushing blow.
But Gap insurance coverage protects people in many ways when they opt for its usually affordable protection against possible financial ruin. A lot of people in the United States in recent years found their homes suddenly had plummeted in value, putting them “upside down” on their home loans. In short, they financed their homes for up to hundreds of thousands of dollars or more at a time when real estate prices and home values were at all time highs. But when the housing market corrected itself, as all free market systems ultimately must, those same people owed a great deal more than their homes were worth. For those who simply bought their homes to live in, the adjustment meant they either needed to seek a refinancing deal if possible or buy gap insurance coverage to protect against the large deficit already existing between their homes’ actual value and the amount owed on the home mortgage signed during the years prior to the housing bubble bursting in 2008 and 2009.
The coverage could save homeowners potentially hundreds of thousands of dollars in financial costs if their homes were destroyed by fire or some other peril and a new home were needed. And the coverage protects drivers when they purchase it to insure against the potential cost of wrecking their vehicles and being left on the hook for potentially tens of thousands of dollars in debt after the insurance company declares the vehicle a loss and pays the current cash value to the lender minus and deductible amount. The lender in turn can demand immediate payment for the remaining sum, leaving the owner liable for a large chunk of cash in addition to the typical $500 to $1,000 deductible most people carry on their financed vehicles.