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A GAP waiver is an optional contractual obligation offered during the financing of an auto in which the seller agrees to waive any amounts still owed on an auto loan in the event of total loss.
In Colorado, GAP is typically a debt cancellation product and it is regulated by the Uniform Consumer Credit Code. The Colorado Uniform Consumer Credit Code adopted Rule 8 which specifies rate caps for GAP contracts. The GAP fee may not exceed $300 or 2% of the amount financed, whichever is higher.
Gap insurance does not cover routine maintenance, a damaged car that is not declared a total loss, or missed car payments. Gap insurance covers the difference between a cars actual cash value and the balance left on the loan or lease if the car is totaled or stolen.
Gap insurance is an optional car insurance coverage that helps pay off your auto loan if your car is totaled or stolen and you owe more than the cars depreciated value.
EXAMPLE: Your car collides with a guardrail and is totaled. The actual cash value of the vehicle is $15,000, so your insurer may pay you $15,000 if you have auto collision coverage, minus your deductible. However, your loan balance is $17,500. A gap waiver may cover the $2,500 left on your auto loan.
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When your loan amount is more than your vehicle is worth, gap insurance coverage pays the difference. For example, if you owe $25,000 on your loan and your car is only worth $20,000, your gap coverage covers the $5,000 gap, minus your deductible.
Youll only receive a refund for the GAP insurance that you havent used. For example, if you cancel your policy after three months of coverage, youll only get a refund for the remaining nine months (if you paid for a year of coverage). The amount of your refund is based on how you pay your insurance bill.
Average cost of a GAP waiver Purchasing GAP waivers through a lender at the time of financing or refinancing costs an average one-time fee between $500 and $700.

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