GAP Insurance – Learning More

Guaranteed Auto Protection or GAP insurance is essential when it comes to pending and unsettled auto loan. During the first few years, the car that you acquired is considered as brand new, but then a good amount of the loan is already due. In this case, if the vehicle is damaged or lost, its net worth becomes less dramatically. GAP insurance, in effect, takes care of the difference between loan repayment and the current cost of your car. GAP is important especially if your loan has to be paid and you are worried that you might lose ownership of your car.

Mechanics of GAP Insurance

Guaranteed Auto Protection enables you as a car owner to get insurance against the car’s current depreciation. Normally, the vehicle depreciates rapidly; which makes it more costly to meet debt repayment after purchasing the car. If you bought your new car with auto loan, getting GAP together with comprehensive and collision coverage is a good move.

To illustrate, if the value of your car is $20,000 in the first year, with a pending $18000 loan, GAP insurance will be able to help you in case of any damage done o the vehicle. On the other hand, both comprehensive coverage and collision coverage will take care of the car’s market value, which might go down from $20,000 to $16,000 during the first year due to depreciation. The remaining $2000 amount on the car loan will be shouldered by GAP insurance.

Why buy GAP insurance

GAP Insurance

GAP insurance is a must when buying a new car

Accidents can happen anywhere, at any time. Hence, it is a must that you get adequate insurance coverage. In case you damage your brand new car, while you are still in the process of repaying debt, you can rely on GAP insurance for coverage while you still take care of unpaid debts.

However, if you bought your car without using any loan, there is no need to obtain GAP insurance. In this case, comprehensive and collision insurance is sufficient. Suffice it to say that it works best for owners who bought their vehicles via car loan and so possess debts to pay.

Useful Tips and Advices

Some consumers have not realized the significance of GAP insurance. They actually have the notion that it is important only if their car’s value is higher than the car insurance taken. However, during times when auto loan rates are on the rise, car value depreciates fast. If down payment amount was at a minimum, you can depend on GAP insurance to cover any pending loan in case of a stolen or damaged vehicle.

Leave a Reply