“GAP” stands for “Guaranteed Auto Protection”. This is a special type of insurance that is designed to cover the difference between your vehicle’s cash value and what you have remaining on the loan of the vehicle.
If you finance a vehicle and you find yourself in an accident, the insurance company typically pays the value of your vehicle, as outlined by the Kelly Blue Book.
Let’s say that you owe $20,000 but the Blue Book value is $15,000. The GAP is $5,000. If you have GAP insurance, the insurance company will cover that $5,000 difference. Continue reading to learn more.
What is Covered?
GAP insurance is designed to cover the gap between what your car is actually worth and how much you have left owing on it. It will kick in after the basic amount of collision insurance you have and/or the comprehensive coverage that you have.
If the vehicle is negatively impacted by the following situations, your GAP insurance will cover it:
- Collision
- Flood
- Hurricane
- Terrorism
- Theft
- Tornado
- Vandalism
What is NOT Covered?
There are many situations where GAP insurance will not provide you with coverage. When obtaining this type of insurance, it is best to find out what IS covered by your insurance agent as the things that are NOT covered may be too extensive.
For example, GAP insurance does not help in the event that you lose your job and/or are placed on disability in terms of your car payment. It will not cover any type of vehicle repairs. It will not help pay for a rental car if you have to put your vehicle in the shop nor will it pay for any type of extended warranty.
General Costs
You may purchase GAP insurance from a dealer or from the company that provides you with your car insurance coverage. If you purchase from the dealer, you will likely pay anywhere from $400 to $800 for the coverage. The charge will be placed on your loan, which means you will also have to pay interest on the amount that you owe.
It is best to avoid getting GAP insurance through a dealership. Instead, you should purchase it from the car insurance company. In most instances, these companies will only add a small amount to your total yearly premium – which is much more cost-effective, in the long run.
Is it Worth It?
GAP insurance is designed to protect the debt that you have – in terms of what you owe – on your vehicle. If you owe a lot, it is definitely worth it to look into this coverage.
If you fail to obtain it, you will be reimbursed for the difference between that which you owe and the actual vehicle value. If you do not have it put into place, you will be responsible for this amount – which could end up being quite a bit! (Remember, the value of the vehicle will dwindle instantly and significantly as soon as you leave the dealership after purchase!)
For more information on this type of coverage and other types of personal auto insurance coverage, contact us today by calling: 718-855-1836