Contact: (217) 355 9075 - Address: 702 Bloomington Road. Suite 205. Champaign, IL 61822 - Email: dave@insuringchampaign.com

Gap Insurance is one topic that has many Illinois Car Buyers confused. Should I buy it? Do I really need Gap Insurance for my new car purchase?

We will get to our answer later, but first lets talk about what Gap Insurance is and what it covers.

Gap Insurance can be defined as: 

"Gap insurance has one main goal: to pay off the balance of a loan or lease if the vehicle is totaled and the loan or lease balance exceeds the actual value of the car."

gap insurance vehicle

Now lets give an example of how Gap Insurance would work. 

You buy a brand spanking new car for $35,000 and make a small down payment and finance the rest. One year later you’re in an accident that wipes out your car. The insurance company writes a check for the current value of $28,000. Your loan balance is $32,000. The gap insurance will pay the $4,000 loan balance ($32,000 – $28,000).

Think this can’t happen? It does all too frequently. We’ve paid several claims where this exact situation occurred and our customer was so happy to have Gap Insurance. It may have been 9 months or 2 years down the road, but it has happened. And let me tell you, nothing is more painful than having to continue paying for a car you no longer have. And if you still owe money- you still must pay. Gap insurance makes this pain go away.

Sounds like a No-Brainer so far!

Risk of Financial Disaster

Car loans are changing. It is not uncommon for loans on new cars today to be 66, 72 or even 84 months. While the longer loans give you more time to pay and reduce your monthly payment, they also increase the risk of financial disaster if the car is totaled during the loan period.

A broad rule of thumb is that cars depreciate 25% in the first year, lose half their value after three years and are worth about two-thirds their purchase price at five years. But balances on longer loans don’t shrink as quickly, leaving drivers financially exposed.

A $27,000 car bought with no down payment would be well "under water" in the first year under almost any new-car loan, and in the red after three years on any loan longer than five years. On an 84-month loan, you’d owe more than the car is worth for 60 months.

That's why it is wise to find out more about Gap Insurance.

Because you took out a loan on your car the bank requires you to keep "Full Coverage" on the car. Meaning you must carry collision and comprehensive coverage to repair the car if it is in an accident in order to protect their investment in the car.

But No Insurance company on the planet will pay you more than the Actual Cash Value (ACV) of the car if it is stolen or totaled. How much you owe on your car loan is not a factor in determining the value of your vehicle.

The difference between what the insurance company offers and what you still owe on the car is the "Gap" you are trying to cover.

 Where Can You Buy Gap Insurance?

There are 4 basic ways for you to buy Gap Insurance.

  1. From the Dealership
  2. From Your Insurance Agent (If the car is NEW, It will not be available for previously titled vehicles)
  3. From stand alone Gap Insurance Providers like GapDirect
  4. Your Bank or Credit Union may offer Gap Insurance as part of their loan package.

How Much Does Gap Insurance Cost?

You need to compare Gap Insurance estimates before you finance your car. Most dealerships offer gap insurance but it may cost 50% more than what you might be able to get from your insurance agent says veteran credit insurance professional Scott Henderson of Corona Del Mar, Calif.

"Prices [for the same policy] can range from $300 to $700," he says. "It's one of many things that [a consumer] should educate themselves about before they go to the dealership. Many people have their first exposure to gap at the dealership."

You can buy gap coverage through many insurance companies, too. They often refer to it as loan/lease payoff coverage. Expect to pay 5% to 6% of the combined annual cost of your comprehensive and collision premiums. That is, if you pay $1,000 a year for comp and collision, you pay an additional $50 to $60 a year for gap coverage.

Know the differences in the Gap Insurance Options.

One important factor to consider is your ability to manage your Gap Insurance once you are no longer "Under-water" or Upside-Down" on your payments. Check the conditions under which you can drop the Gap Insurance and find out if you will be refunded any unused premium. Most policies from the dealership you will be forced to pay for it for the entirety of your loan, even after you no longer need it because it is factored into your monthly payments.

Another benefit of adding Gap Insurance to your car insurance policy is that you can drop the coverage at any time. So when you finally have that new car paid down enough that you no longer have a "gap" to be covered. You simply call your agent and ask them to remove the coverage.

The Final Answer: Adding Gap Insurance is just a smart financial decision.

I have seen many articles on the internet saying just the opposite, but those articles will not pay the difference between what you owe and what your car is worth. I have also seen several people who avoided financial disaster by having this overlooked coverage. Like any insurance policy, auto insurance is meant to protect you from a financial catastrophe. Adding gap insurance to your auto insurance policy is just one more way to accomplish this goal, at a very affordable cost.

You may prefer to buy your Gap insurance at the dealership and that is fine. Just make sure you properly protect yourself from Financial Disaster by purchasing Gap Insurance for your new car.


How to Handle Insurance in a Divorce

Broken Marriage

Your car, property, life and health insurance can all be impacted by divorce. When you are sorting out the details of a divorce you need to make sure each party is properly protected as you separate.

Go Over all of Your Policies

Divorce can affect every facet of your financial life—including your insurance. In many relationships, one person acts as the primary accountant paying bills and managing accounts. If you're stepping into the accounting role, it's very important to better understand the ins and outs of all your policies.

  • Know your premium due dates. For some policies—term life insurance, for example—missing a payment may result in cancellation.

  • Get a basic understanding of what each policy covers, what it doesn't, and whether it makes sense to adjust coverages and limits for your new life.

  • Adjust your policy information—things like the names on each policy, mailing addresses, dates, etc.

  • Pick up the phone. A big part of your agent's job is helping you make smart decisions and explaining policy nuances.

Auto Insurance

You may be insuring one car now instead of two or more. Now is a good time to review your coverage and limits with your agent. Pay extra attention to your deductible and make sure it is in line with your new financial picture.

If your policy includes teen drivers, you will need to decide whose policy they will be covered on.

Home/Property Insurance

If one of you will be keeping your current home you will need to meet with your agent to update and review the coverage on the policy.

If you’re moving to an apartment, you will need to talk to your agent about renters insurance. (Even if your move is only temporary) It’s an inexpensive way to protect your personal property and keep your insurance history intact.

Life Insurance

Life insurance is often neglected in a divorce and it must be reviewed carefully. Refresh your memory on what type of policy you have (Term Life or Permanent Life). Review the terms and payments.

 

TIP: Make sure you change your beneficiaries! It is an all too common occurrence for the beneficiary not to be updated. Then at the time of passing the life insurance benefit must be paid to whoever is listed as the beneficiary on the policy. Many times the money is intended for a new spouse but if the policy has not been updated the money will go to the ex-spouse.

 

We're Here to Help

Here at Rueck Insurance we can help you make the necessary changes to your policy and work out your new insurance needs. For expert help managing all your insurance needs, talk to us at 217-355-9075


Whether you are buying a home for the first time or just looking around after your current company raised your rates (again!), shopping for home insurance can be a daunting task. I am going to share with you what to have ready when you call your local Champaign- Urbana or Illinois insurance agency so you can provide all the necessary information in just one phone call or email and try and take some of the hassle out of the process for you. 

There are many factors and variables that go into your insurance rates, but we still get people who call in wanting to know how much would it be for a $175,000 home  located in Mahomet (or any other local town). We need to know much more about you, the house and your community in order to get solid numbers on your home insurance estimates.

TIP-If you are currently insured please grab the declarations page of your most recent policy. It won't have everything you need but it will be helpful

Part 1- The Residents living in the home

  • We will need to name and date of birth of each resident of the home. 
  • We will need the social security numbers before we complete the policy, but they are not needed to get a preliminary estimate.
  • Your occupation (some companies will give discounts for certain professions)
  • Any prior property insurance information (homeowners or renters if applicable). If you have been previously insured and have had no claims you could qualify for a claim free discount.
  • Any prior losses or claims made on property insurance
  • The Physical Address of the home to be insured
  • Do you have any pets? If you have a dog what breed(s) There is a list of some dogs that insurance companies will not accept.

TIP -Be honest and don't try and hide the dog from the insurance company. If they find out there is a dog on their no-write list in the home it could void the entire policy due to misrepresentation and leave you in a dangerous situation with no coverage or an uncovered claim. Also disclose if your dog has a bite history.

Part 2 - The Home

Each company will want to estimate the replacement cost of your home using their Replacement Cost Estimator (RCE), so you will need to know many specifics on your home. This is easier for new home buyers because they can just access the listing provided from their realtor.  You need to be ready to provide the following.

  • Total Square Feet of the home (exclude the basement if applicable)
  • Number of stories
  • Type of foundation (Crawlspace, Slab, Unfinished Basement or Finished Basement)
  • Central Air Conditioning (yes or no)
  • Type of heat used (gas, electric, etc)
  • # of fireplaces in home
  • Approximate size of any deck or patio 
  • # of full and half bathrooms
  • Type of Garage (attached, built in or detached) with number of cars it will hold
  • Construction of the home (Frame, Brick or Combo of the two)
  • What year was the house built
  • Any detached buildings?
  • Size of the property (if in a rural setting)
  • How many miles from the responding Fire Department?

Part 3 - Home Updates & Renovations

Insurance companies want to know that the house has been properly maintained and that major components have been recently updated. Be prepared to know the following updates if you home is over 15 years old. 

  • How old is the Roof? (must be less than 20 years old for most options)
  • When was the last time the Plumbing was updated?
  • When was the last time the Electrical was updated?
  • How old is the Furnace/Heating System?

Part 4 - The Coverage's You Prefer

One of the nice things about an Illinois Home Insurance policy is that most of the coverage's are percentages of the total dwelling coverage on the home. For Example if you have a home with a replacement cost of $200,000 you would have following coverage decided for you.

  • Dwelling $200,000
  • Detached Structures $20,000 (10% is automatically included in the policy)
  • Personal Property  $140,000 (this will be between 50-75% of your dwelling coverage depending upon the company)

You will need to decide on the following coverage amounts

  • Personal Liability (sometimes called Family Liability)
  • Guest Medical Payments
  • Preferred Deductible (most companies have a minimum deductible of $1000 now)

TIP- Make sure your home has Replacement Cost for your Personal Property.

Part 5 Optional Coverage's

Every homeowners policy has internal limits on some items. (check with your agent if you have special needs in any of these areas)  If your specific situation requires additional coverage let you agent know. Here is a partial list of what might have limited coverage on your policy.

  • Jewelry (most commonly capped at $1000 included)
  • Guns
  • Collectibles
  • Business Property
  • Coins/Money

Other optional coverage's you may want to consider.

  • Water/Sewer Back Up (recommended , especially if you have a basement)
  • Identity Theft
  • Earthquake (not covered on basic home policy)
  • Flood (not covered on any home policy)

I know it looks like a long list but it will save you time and hassle if you have all of this information ready when you call your local insurance agent to shop for home insurance.

Tip- In order to get the best deal, shop your car insurance at the same time. All companies we represent will give you a multi-policy discount if you insure both your cars and home together. You can find out what you need to get a car insurance quote here.

 

 

 

 

 

 


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About Us

Rueck Insurance is your independent, one-stop insurance center for all your personal and business insurance needs in Illinois. Insurance shopping is easy when the Protection Team provides you with multiple quotes to choose from. You will always know you are getting the best coverage at the lowest possible price.

Contact Info

Rueck Insurance is your independent, one-stop insurance center for all your personal and business insurance needs in Illinois.

702 Bloomington Rd#205
    Champaign, Illnois
(217) 355-9075
dave@insuringchampaign.com

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