Many are curious why cant military get gap insurance. Unfortunately, a few amendments in the Military Lending Act have been passed to inhibit military members and their dependents from obtaining some credit services.; one of which is gap insurance. But these amendments are repealed so you can obtain that gap insurance.
So in case an insurance dealership told you that you cannot be provided with this, then it is possible that they are not aware of the changes yet. You may also check your existing car insurance provider as most of them offer gap coverage along with their insurance policies.
You must understand the coverage that you have. Most people think if you gap insurance and get into an accident, the insurance provider will replace the car when it is totaled. But it does not always work like that. There are many more things that you should know about this topic; just read on to find out!
What Is Gap Insurance?
So, why cant military get gap insurance? It’s because gap insurance is necessary only for the following instances:
- When leasing a car
- Rolling out negative equity to get a new vehicle
- If you have a financing term that is longer than 5 years
- You paid zero or minimal down payment
Bear in mind that the new car you purchase will start to depreciate as soon as you drive it. On average, the depreciation of a new car is about 20% during the first year of owning it. This is because most people do not just purchase the brand new car, but essentially they are also paying for the excitement of driving it. For instance, if you buy a brand new pick-up truck. You would also upgrade some of its parts to make it more suitable for the adventures you have in mind.
This can include putting new shocks, lights, among others. Now, the money you invested in your vehicle is even larger. But later on, you are notified about your transfer order. When this happens, you have to move with your family to a new location where you are assigned to.
Perhaps, during the transport of your brand new vehicle towards the other part of the country, an accident has happened and your new vehicle was destroyed. If you purchase that truck through financing and only deposited a small amount, then your load would be higher than the vehicle’s market value.
In other words, you will be left with a balance that you still owe for the totaled truck. Plus, the accessories, lights, tires, exhaust, and rims you purchase are not a part of the vehicle’s actual cash value.
Most of the auto insurance policies will only cover the vehicle’s ACV. This is the actual cost you have to pay for a new car, minus its age, physical condition, mileage, and other factors when the car is covered. Meaning to say, you may end up having a huge amount of outstanding balance for a truck that you cannot drive anymore. In this case, gap insurance is important. When we say gap insurance, it is an extra coverage one can add to their auto insurance policy.
This can cover the lease or loan balance if a vehicle has been lost, stolen, or destroyed. However, if the insurer is only covering based on the ACV of the car, you still have to pay for the remaining balance. For instance, if your balance is around 60 dollars and the insurer will cover for 50 dollars, you are liable to pay for the difference. Furthermore, the coverage of gap insurance does not include any expenses or charges associated with the lease or loan and the excess mileage and unpaid finance fees.
When Is A Gap Insurance Most Needed?
It is important to have gap insurance in place during the early year of brand new vehicle ownership. This is especially true if the vehicle cash value is less than the amount financed by a loan. But as you are getting closer to the end of the financing term, it becomes less important to have gap insurance. That is because the amount financed by a loan has already caught up to the vehicle’s value.
You can remove the gap coverage from your insurance policy any time you think it is no longer necessary. However, particular lease terms are requiring gap insurance. Each lease term will indicate specific details about the required coverage.
It’s A Wrap!
The reason why cant military get gap insurance before is due to the amendments made in the Military Lending Act. But these amendments have been repealed already, so the military service members can already get this type of insurance.
Just take note that the gap insurance will not replace comprehensive and collision coverage. That is another coverage that is a legal requirement in many states if you lease or finance a vehicle. Gap insurance is another coverage that you may or may not acquire.
If you pay for the vehicle in cash, gap insurance is not needed. The same is true if you pay more than 50-percent of the vehicle’s balance as a down payment, regardless of the terms.