There are two types of gap insurance coverage schemes currently available: vehicle gap insurance cover and medical scheme gap insurance cover.
Medical gap insurance: There is a waiting period for medical aid gap insurance coverage. Therefore members with pre-existing medical conditions before joining the medical gap insurance will see the length of the waiting period before they qualify for full insurance coverage, which is applicable with that particular existing medical condition.
Private Healthcare facilities rates continue to rise making it difficult for medical aids to keep their rates in line with these increases and still be affordable for their members, this is when gap coverage comes to the rescue by covering the shortfall difference payable between these two rates from the medical aid members.
Vehicle gap insurance: Gap insurance coverage with vehicle coverage is immediate.
A gap insurance refund is an add-on coverage that helps bridge the gap between your principal balance on your loan and your vehicle’s actual cash value in the event of a total loss.
Suppose you settle your gap insurance policy in advance with one entire lump sum of money payable. In that case, you will receive a refund for the months stipulated on your lease agreement period that was not used . However, if you opt to pay your gap insurance in monthly payments, you won’t get a refund on any past months.
While you won’t get a full refund on your gap insurance policy, you can get a portion back once your car’s original agreed lease balance. How a gap insurance refund works depends on how you go about paying off your auto loan:
Yes, you will be entitled to a partial gap coverage refund that you do not use if you pay your vehicle off early. Gap insurance will cover both the purchase price of your car and the term of the loan. If there is a reduction in the long-term loan amount payable due to earlier payment, then likewise, you should receive a refund from your gap coverage as well. You will have to show your car insurance provider a payoff notice for you to receive this refund and this will be when your regular motor insurance refuses to payout due to the following reasons;
Yes. For example, in 2018, a class-action case was launched against Wells Fargo, a multinational financial services company. Wells Fargo failed to offer gap insurance refunds to customers who terminated their vehicle loans earlier than the specified loan contract period. Shamis and Gentile Law represented these clients and managed to get a $500million settlement of refunds for them.
Yes, gap insurance is great to have with your medical aid as it will protect you in the event that your doctors fee is more than what your medical aid rate will be prepared to pay , in this case the cash shortfall between these two , your gap cover insurance will settle.
If the value of your vehicle is higher than the amount you owe, you don’t need gap insurance as there is no shortfall. In some cases, gap insurance cover is a requirement by your financing company to protect all parties against losses.
If your loan outstanding is close to the value of your vehicle, you will see very little or no refund in the event of a motor vehicle accident, or motor vehicle theft refund claim submitted.If the value of your car is less than the money you owe on your vehicle loan, then gap insurance save you from paying the shortfall out of your pocket. If the value of your car is higher than the loan amount you owe, however, you will not need gap cover insurance, as there will be no shortfall.
A point to remember when considering gap insurance for your vehicle is that a used vehicle depreciates much slower than a new car. For example, a brand new car will decline in the first three years by 70%, and a used vehicle will only depreciate 30% over three years.
Yes, especially if you are financing a vehicle with a high depreciation rate, gap insurance is a must. Luxury cars, for example SUVs and electric vehicles, see plummeting values after the first few years.
Also, gap coverage includes New Car Replacement Insurance for the first year of ownership, and gap insurance will pay the difference between the value of your vehicle and the amount of your original loan, up to 120% of the value of your car.
A class action lawsuit was filed in 2018 against a major bank, Wells Fargo, by its customers represented by Shamis and Gentile who claimed the bank refused to refund gap insurance to their customers who terminated their loans with the bank .This lawsuit was successful and Wells Fargo was ordered to settle refunds in dispute to the value of $500million.
If you had a Wells Fargo car loan and you ended your loan by either refinancing, selling or trading your car and were not compensated for your gap insurance refund then you may still be able to claim a gap insurance refund.