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GAP rates to rise?

November 22, 2010

Damage caused by this year’s hurricanes, especially Katrina, and the steep depreciation in the value of used vehicles could force rates for GAP insurance to jump 25 percent to 30 percent by next year, according to Automotive News.

About 695,000 cars were reported damaged by Hurricanes Katrina and Ivan this year, which caused insurers to raise rates. High gasoline prices and widespread new-vehicle price discounts also make used cars less attractive, further depreciating used-car values.

The projected 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.

The rise also could discourage many insurers from entering the GAP market. Ten carriers stopped underwriting GAP in the past three years; there now are seven major providers in the market.