This is a guest post.
It can seem a bit overwhelming with so many different types of car insurance policies to choose from. The good news is that with just a little bit of basic information you can have an understanding of auto insurance coverage and what you may need. One of those strange policies is GAP insurance.
So, what is GAP insurance?
- GAP insurance actually stands for Guaranteed Auto Protection. Many drivers believe it means filling in the gaps that other types of car insurance policies leave out. That is not the case. There are a few different circumstances that someone would need GAP insurance coverage and you will see it really does help fill in some gaps.
- GAP insurance actually covers the difference between a car’s actual value and the amount owed on the car. Since a standard auto insurance policy would only cover the book value of the car should something happen. GAP insurance covers that remaining balance. If you don’t carry this policy, you could be financially responsible for thousands of dollars out of your own pocket.
- The most common use is when you buy a brand new car. Once you drive your car off the lot, the amount you owe and the actual value of the car are no longer equal. In fact, there is actually usually quite a big difference. If you have a wreck and the car is totaled – your GAP insurance would pay the difference between the value and the amount owed on the car. Without GAP auto insurance coverage, that difference is still yours to pay. This is also true for coverage if the vehicle is stolen and not recovered.
- Another term you may hear associated with GAP insurance is “upside down auto loan” or “upside down trade in”. Auto insurance policies cover the market value of the car or the cost to repair your car. They pick the least expensive of these two. Because of depreciate there is a good possibility that your market value is less than what you still owe on your loan. A GAP insurance policy covers you in the event that this happens.
- If you get a car and intend to put a great deal of mileage on it for work or travel the value of the car will quickly depreciate. Even if you start with a vehicle loan that is close to or under the value of the car, or if you do anything to it that could quickly depreciate the value, you will probably want to carry GAP insurance coverage.
Whatever the reason, GAP insurance basics are intended to help you realize the importance of this type of coverage. Without it, you could end up paying a great deal of money from your own pocket to pay for damages to a vehicle you no longer have in your possession.
Keep in mind, some lenders will actually require you to carry GAP insurance as part of your coverage if you are getting a car that is financed or leased. When in doubt ask and find out if it is required. Even if it is not mandatory but you feel you’re a driver who fits into a demographic of someone who needs extra policy protection, you should strongly consider getting the coverage. When it comes auto insurance, make sure you have all the protection you need on the open road.
This is a guest post.