GAP Rates May Soon Be On the Rise
Damage caused by this year's hurricanes, especially Katrina, and the steep depreciation in the value of used vehicles, could cause rates for GAP insurance to rise 25 percent to 30 percent by next year, according to Automotive News.
Damage caused by this year’s hurricanes, especially Katrina, and the steep depreciation in the value of used vehicles, could cause rates for GAP insurance to rise 25 percent to 30 percent by next year, according to Automotive News.
According to Carfax, there were 695,000 cars reported damaged by Hurricanes Katrina and Ivan this year, which has caused insurers to raise rates. In addition, high gasoline prices and widespread discounting of new-vehicle prices make used cars less attractive, thus depreciating the cost of used vehicles.
The projected rate increase would push the average dealer price of GAP coverage to $200 or more a policy. Dealers typically charge buyers $500 to $700 for the insurance. Industry insiders also said that the rise could discourage many insurers from entering the GAP market, citing the fact that ten carriers stopped underwriting GAP in the past three years. There are currently only seven major providers in the market.
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