Guaranteed Auto Protection (GAP) insurance is an added premium based on the difference between what you owe on a car and the actual value of it. Gap insurance is mainly targeted toward new car owners who are beginning to pay off their auto loans and need extra protection in the event of an accident.
What Does Gap Insurance Cover?
Cars with gap insurance are protected in the event that a car is stolen or destroyed before the owner is able to pay off his or her loan.
Without gap insurance, the owner of the stolen or destroyed car would still be responsible for paying the remaining balance on his or her loan despite the fact that the owned car is no longer operable or in possession of the owner.
Auto loan borrowers with gap insurance will have the remaining balance on their loans paid off by the insurance provider in the same situation. Should the unexpected happen, the owner of the vehicle would, with the help of the insurance provider, be able to settle the account without incident.
What Are The Benefits of Gap Insurance?
The unique coverage that gap insurance offers is great for higher risk auto investments such as:
- Luxury Cars
- High Performance Sports Cars
- Large Trucks
- High Theft Risk Automobiles
Many gap insurance providers will include a clause in your policy that protects against theft or defacement. Purchasing gap insurance on a high-priced vehicle will help you retain the value of the car for a longer period of time without worrying about factors that you cannot influence.
When leasing automobiles, your standard insurance on the lease may not be able to cover the cost of a serious auto accident. With the help of gap insurance, the amount of money for which you are liable can be paid by the insurance provider in the event of an accident.
When Should I Purchase Gap Insurance?
The cost of the insurance can be paid in full whenever you complete a purchase on a new car. In this case, the cost will be built into your auto loan and you’ll pay the total cost over time while still enjoying immediate coverage.
It’s best to buy insurance when your vehicle is still new and the amount you owe on your car is greater than its current value. Buy gap insurance when:
- You’re paying a loan that will take over 24 months to pay
- You have financed over 70% of the value of the car
- You drive more than 12,000 miles per year
Talk to your local insurance agent to discover what kind of gap insurance you may need for your vehicle. If you buy your insurance online, you run the risk of foregoing coverage that you may need in an emergency. Shop carefully and protect your investment.