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For our latest post we welcome guest contributor Adam Wagener to share his insights on GAP insurance – and what you should know about it as a rideshare driver. Adam has been a rideshare driver since June 2014 and likes acting, writing music, and drinking an occasional craft beer after a shift!
There are a lot of expenses when you’re a rideshare driver: Gasoline, maintenance, car payments, amenities, just to name a few. And let’s not forget the one you’ll pay the most money for and hopefully use the least — insurance! Sure everyone knows about auto insurance, because you need to have it to drive your car legally, but what about GAP insurance? Do you really need to get this as a driver? Here’s what you need to know before you make a decision.
Let’s say you picked up a new car. Maybe you trade in an old gas-guzzler to grab a nice, fuel-efficient ride. Chances are, you aren’t able to pay all cash, so you get financing for most or at least some of it. During this process, the sales person should offer you something called GAP insurance, or “Guaranteed Auto Protection.”
GAP insurance protects you in the event that you drive off the lot and total your car before you can pay it off.
This means paying out a significant difference between the amount you owe on your car loan and what your car’s estimated worth is. With this GAP stuff, you can feel a lot safer, but it sure costs a lot. Perhaps an extra $1,000 on top of the purchase price of a $22,000 car, for the extra peace of mind.
In my example above, would you save a cool grand, or would you buy the GAP? If you’re a rideshare driver and you’re still paying off your car, my opinion is an emphatic “Yes, add the GAP policy!” If you’re a driver in a crazy busy major city, it’s an even more obvious yes!
There’s a little secret for getting this GAP coverage, even though it adds onto your final price. But first, let’s consider why, as a rideshare or delivery driver you should even consider it.
In my case, I’m usually working in the traffic-laden, overcrowded Los Angeles market, where dodging jay-walkers is a sport, and you have to pay the homeless squeegee guy a dollar to NOT wash your windows.
“Each day that I’m transporting passengers, I dodge probably three to four bad drivers, crazy bicyclists, ornery pedestrians or a combination of the above.”
Even today, I had to take a risky left turn onto a busy street, and thankfully a speeding bus slowed down for me as another car going my direction nearly crowded me out of the lane, leaving me exposed. A bicyclist was also going the wrong way down the sidewalk, into the intersection, and he looked at me like I was the jerk when he almost hit my front bumper.
Drivers texting while turning the wrong way onto a one-way street and almost hitting you head on, insane criminals swerving erratically because they’re literally in fist fight in the front seat of their car, ornery pedestrians kicking your front bumper and spitting on your hood because you’re stuck in the crosswalk and they have to walk around you. All of this has really happened to me. As a fellow driver reading this, I’m sure you have a dozen stories of your own!
Since picking up my 2009 Prius last year, it has suffered a few scuffs and bruises, but thankfully never a complete wreck. Even more thankfully, that means I never needed to use my GAP insurance, which cost about $850 at the point of sale, and was meant to last throughout the six-year repayment schedule. Instead of the minumum $325/month payment the financier was asking, I felt like I could pay a little extra each month to bring down the overall cost.
I put on countless hours of Lyfting and Ubering as soon as I got my new car verified to try to payoff the principal as quickly as possible, and after about one year, I was amazed to see that I’d paid down $10,000 and now owed only about $7,500. I did some research, and found out that Kelly Blue Book and Carmax both agreed that $8,000 was the estimated worth of my Prius. I thought “well, too bad I threw $850 into that GAP policy, which I never needed,” because my personal insurance covers me fully if anything should happen to total my car.
Later that day, to my great surprise, a helpful customer service representative at the GAP company asked if I’d be wanting a partial refund on my GAP insurance!
In just a few minutes, I wrote up a short letter to mail to the GAP company (yes, in my case I had to snail mail a cancellation letter) and about a week later I got a refund check for $720. That means I really only spent $130 ($850 – $720) to ensure that I was covered for all costs in the event of a total loss. I’m sure you already guessed, I used that money to make another hefty payment on my car!
Here’s the shorthand version of how it works:
If your car is worth less than what you still owe on it, then make some extra payments like I did so you won’t need the guaranteed auto protection and ideally, you’ll cash in a refund. And that’s the GAP insurance secret.
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