If your car is stolen or added up in an accident, g-insurance covers the difference (the “g”) between what you owe on a loan or lease and the value of the vehicle or the actual cash value that the insurance industry has is called. The g insurance, also known as guaranteed automatic protection, is usually optional but may be required by some lenders and is included in some rental agreements. So do you need it
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The main reason for g insurance is that cars lose a lot of value in the first few years, around 20% in the first year and 40% or more after three years. When someone pays a small down payment on a loan or signs a lease that requires minimal prepayment, that depreciation means that they may owe more than actual cash value for the first few years of ownership, if the vehicle is total or not of recovered from a theft.
Who needs it
Here’s an example: if a vehicle is total and the insurer determines that its present value is $ 25,000 but the owner still owes $ 28,000, the owner would have to cover that $ 3,000 difference if they didn’t have g-insurance.
The average new car loan has a term of almost six years, and a buyer can be “upside down”. ((owe more than the car is worth) for three or four years – – or longer, especially if they added negative equity from a previous vehicle to their loan.
However, everyone may not need insurance. For example, if you pay a down payment of at least 20% or limit the loan to five years or less, the car may always be worth more than what is owed on a loan.
G insurance may be advisable at the time of purchase but is not required during the life of a loan. The buyer can only be underwater for a few years before monthly loan capital payments catch up on depreciation for a vehicle that holds its value well. Conversely, they could be underwater longer in a vehicle that rapidly depreciates.
Car Dealers Vs. Insurance Companies
The Cars.com AppreciateLenders and insurance companies can estimate the value of a car based on its age, mileage, and condition to determine if insurance is still needed based on how much the owner still owes.
Car dealerships offer insurance, often for a flat fee that can be hundreds of dollars, but the Insurance Information Institute says Insurance companies can add it to a collision and comprehensive policy for as little as $ 20 to $ 40 a year. As with other types of insurance, the amount can be higher depending on the value of the vehicle and the owner’s age and driving experience.
Insurance companies write their own rules for coverage, and some require you to pay the standard collision deductible and full coverage. others don’t. Before you commit to taking out insurance, there are several sources you should consider, such as: B. from an insurance company or dealer, and get a second opinion on whether this is necessary. Before signing a lease, ask if it’s included to make sure you’re not paying for something you already have.
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