What is GAP Auto Insurance?
As soon as you start driving off the dealer’s lot, your new car isn’t new anymore. It’s used, and that lowers its value. If you get into an accident or get your car stolen THAT DAY, your insurance company will only pay for what it’s worth, not what you owe for it. This way you could get a nice loan of a few thousand dollars. Gap insurance can change that. Gap (Guarranteed Auto Protection) insurance is insurance for that gap, the difference between what you owe on your car and how much your insurance company values it at.
Here is an example of how GAP insurance coverage works:
Loan balance of your car or truck on the day it’s destroyed: $24,000 (this is how much you owe the bank)
Actual cash value on date it’s destroyed: $16,000 (this is how much your insurance company says it’s worth)
Payoff WITHOUT GAP coverage: $16,000 (this is how much your insurance company will give you)
Loan balance after payment: $8,000 (this is how much more you need to pay the bank out of your pocket)
Payoff WITH GAP coverage: $24,000
Loan balance after payment: $0 (With GAP insurance, you don’t have to pay from your pocket)
As you can see in the above example, GAP insurance is good to have.
Gap insurance could be the difference between getting all your money back and owing the bank money for a car you don’t have anymore. Yet it is only good as long as your insurance company values it more than what you owe for it. Once they’re even, it’s time to stop. You would be giving money for nothing. That’s why its better to buy Gap insurance on a newer car rather than an older car.
If you lease or finance your car or truck, it is smart to have GAP insurance. Click on the link below for the best price on Gap Insurance. It’s actually inexpensive compared to what it saves you.