Gap Insurance for Both Your Auto and Home Insurance
Auto and home insurance is not exactly two peas in a pod when it comes to shopping for policies. Auto insurance is needed just to keep your driver's license. Home insurance is needed for protection against financial ruin. Of course, there is also a fair amount of overlap between auto and home insurance. Lending institutions, for example, usually require additional insurance coverage to protect their own financial interests. But one of the most interesting things that auto and home insurance share in common is "gap insurance."
Gap insurance is not really insurance at all, whether you're talking about auto or home insurance. Rather, gap insurance is a way of making up the difference between what an item is worth and the money needed to protect the policyholder against financial hardship. What's this difference and how is it created? Well, that, too, depends on whether you're talking about auto or home insurance.
Gap Protection for Auto Insurance
If your car is totaled, your insurance company is only going to pay you what the car is worth. And, unfortunately, many people owe more on their cars than their vehicles are worth.
Gap protection will make up this difference. How exactly is it that you can owe more on a car than the car is actually worth? There are, in fact, many ways this can happen. Everybody has heard that a car loses value the moment you drive it off the lot. If you put no money down on the car, you may have financed the tax, license, registration, and extended warranties, all but guaranteeing you owe more to the bank than the car is worth. Moreover, many cars will depreciate more in their first year or two than borrowers will pay on their loan term. Thus, the gap between what you owe and what the car is worth may actually get bigger before it gets smaller.
Things to Consider for Auto Insurance Gap Protection
- Most dealers offer their own gap protection, but it's usually cheaper to buy this protection from your car insurance company.
- Make sure you know about exclusions that apply to your gap protection. Some gap protection covers accidents, but not natural disasters or theft.
- Try to minimize this gap as much as possible when you're buying a car, and keep track of this gap so you can cancel when it's no longer needed.
Gap Protection for Home Insurance
People looking for the cheapest home insurance they can find, frequently opt for market value home insurance without fully understanding the consequences. Should you lose your home to a fire, your insurance will only pay you the market value of your home, minus the value of the land, no less. Worse yet, since the housing crisis has pummeled property values, the difference between market value and replacement costs are at historical highs in many areas. If you're one of the 25% of homeowners who owes more to the bank than the house is worth (this rate is forecasted to jump to 50% in 2011), not only will you not be able to rebuild your home, you may have to make up the difference to the bank, despite no longer having a home to live in.
Things to Consider for Home Insurance Gap Protection
- Research how big this gap may be. In today's housing market, the market value may be less than half of the replacement costs.
- How much sentimental value is attached to your home? There will be headaches involved, but it might be possible to take the market value settlement and relocate.
- Again, be cognizant of exclusions. Most home insurance policies don't cover floods or natural disasters, unless you purchase supplemental coverage.
- For home insurance, companies may offer a gap protection compromise, known as actual cash value. This value is determined by taking the replacement costs of your home and subtracting the years of structural wear and tear.
Online Auto and Home Insurance Quotes
Online auto and home insurance quotes are game-changers to consumers even if they already seem commonplace to those with Internet savvy. It's one thing to know that you need to comparison shop to get the best deal on insurance. But it wasn't that long ago that people had to cold-call insurance companies or walk into the local insurance agent's office. High-pressure sales tactics and getting the whole deal over with frequently trumped basic marketplace principles.
By using a service like NetQuote, however, you can shop for insurance in the comfort of your own home. Whether you're looking for gap protection or just a basic insurance policy, we can help you find the best company for your needs. You should know, however, that insurance companies are constantly tweaking their consumer profiles, actuarial math, and specific policy discounts. The best company for you this year may not be the best company for you next year. If you need to keep track of your insurance "gap," this annual reevaluation is all but mandatory. And it commands an easy, reliable way of generating auto and home insurance quotes.