What is Gap Insurance?
GAP insurance, also known as guaranteed asset protection, covers the gap between what you owe on your vehicle and how much the vehicle is worth (actual cash value). This insurance is used after an unwanted occurrence happens such as if you were in an accident or if your car was stolen. GAP insurance is optional but may be necessary if you are making payments or leasing a car. This type of coverage will help you pay what was owed on your car if what you owed is more than the depreciated value.
Why Do I Need Gap Insurance?
As soon as you drive off the car dealership with your new car, the value of the car decreases immediately. The worth of your car can decrease more than 20 percent after the first year of you having it. The car will also continue to decrease by 10 percent annually after only one year of you owning it, according to CarFax.
If your car is totaled, then the cost of repairs is more than the actual value of your vehicle. GAP insurance will not pay for a new car if this occurs. Instead, this insurance will cover the loan or lease of your car so you won’t have to pay your auto loaners out of pocket. Depending on your insurance, GAP coverage is around $20 per year in addition to your insurance premium, according to the Insurance Information Institute. It is best to check with your own auto insurer or contact the dealer/lender for the exact costs and charges for GAP insurance. Factors of costs vary and depend on age, gender, marital status, credit history, and your passed driving record. To avoid paying high interest rates, it is recommended to buy the GAP coverage through your auto insurer, according to NerdWallet. If you owe less than the current value of your car, there is no need for gap coverage.
What Does GAP Insurance Cover?
GAP insurance covers a range of unprecedented occurrences such as vandalism, theft, hurricanes, terrorism, collisions, floods, or tornados. GAP insurance is recommended if you drive a lot, if your car was leased, or if you purchased a car that depreciates any faster than the average. Anyone who has a loan term longer than 4 years or made a minor down payment on a new car (typically a down payment under 20 percent) should also look into GAP insurance.
Contact 770 Good Law Today!
Nobody wants to think about negative things happening to their vehicle. However, there is always a chance of your car being totaled, stolen, and more. If you don’t want to risk owing more than the depreciated value of your car, you may want to consider buying GAP insurance. Contact 770 Good Law today to learn more about this type of coverage. 770 Good Law is filled with experienced auto injury attorneys that are dedicated to providing each and every client with assistance. Schedule a free consultation today so we can hear your case and work on receiving the compensation that may be owed to you.