If you have never heard of GAP insurance coverage, or Guaranteed Auto Protection, you are not alone. Many people are not familiar with the term, yet once they realize what it is they can understand the importance of having it. As you probably know, vehicles lose a great deal of their value as soon as you drive it off the lot. As disheartening as this is, it can spell financial disaster if you get into an auto accident when there is a big difference between what you owe on your car, versus what it is valued at.
Just because you consider the vehicle new several months, or even a year later, it doesn’t mean that the value of it will be the same, according to your insurance agency. In other words, if you still owe $25,000 on your newer car and you get into an accident, your full coverage insurance may only find that the vehicle is worth $22,000. With that coverage, you are still left holding the tab of $3,000 to pay. This represents the gap between what your car is actually worth on paper and what you owe in payments.
What GAP Policy Coverage Does
This type of insurance policy is especially helpful for people that have newer vehicles, as well as on those being leased. Since we have no control over something that can happen to our vehicle, including it being stolen or vandalized, it is important to make sure you have enough coverage that you will not be left having a bill to pay beyond your car replacement or repair coverage amount.
In order to make up the difference between what you owe and what the vehicle is valued at, many people opt for GAP insurance coverage. The importance in having this type of car insurance can be measured by figuring out what you owe, versus what your vehicle is worth. Suppose you purchase a $40,000 vehicle and have monthly payments of $600. Then, just eight months later your vehicle is destroyed in an accident or natural act, such as a hurricane. The problem is that you still owe $35,200, yet the reported value of your vehicle may be thousands of dollars less. Rather than you being stuck paying that additional amount that makes up the difference, the GAP policy would cover it.
Why Consider GAP
The last thing that you as a driver and newer car owner need is to have to pay above and beyond what your vehicle is valued at, should you get into an accident. This is especially true for those who lease cars and may be hit with a bill to replace a destroyed vehicle. If you are someone that still owes money on your vehicle and it is a newer make, or you are going to lease one, you should consider having a GAP insurance policy. For a little extra each month you can have great peace of mind with the financial safety net it provides.
