Is GAP Insurance a Smart Coverage Option for You?
There’s a common misconception among car owners that if their car is totaled in an accident, it will be replaced at the original purchase price, or at least the amount that is still owed for financing. But in reality, this is not always the case. The purpose of this Auto Insights blog is to define the reason behind this misconception, and what you can do to protect yourself.
Gap Coverage Explained
Since a new car’s value drops significantly the minute it’s driven off the lot, if you are involved in an accident that totals your vehicle in the first few years you own it, you may find yourself owing your finance company more than the vehicle’s actual value. Guaranteed asset protection, or “gap” insurance, is an optional automobile coverage that helps you cover the difference between the amount of money owed and the vehicle’s actual value.
Is Gap Insurance for Everyone?
To determine if purchasing gap insurance is right for you, consider the following scenarios:
New vehicle financing options: If you took advantage of a zero percent down payment deal, put a small amount of money down or stretched the life of your loan past three years, gap insurance is most likely a good idea. That’s because the vehicle typically depreciates considerably faster than the amount you have paid down on your vehicle’s loan.
Used vehicles: Gap insurance is typically not available for used vehicles. To cover your risk, it’s wise to make an ample down payment and finance the vehicle for the shortest possible timeframe.
Leased vehicles: For those who lease a vehicle, gap insurance is considered an essential coverage because typically there is no trade-in and little cash put down to lease the vehicle. Similar to purchasing a vehicle, if the car is a total loss, you will owe the difference between what you have paid and what you owe on the balance of the lease.
Cost versus benefit: Gap insurance is offered for a nominal fee, so it can be a great value for anyone who finances or leases a new car.
Talk to an Auto Insurance Professional
To learn more about gap insurance and determine if this coverage option is right for you, talk to the auto insurance experts at VTC Insurance Group. You can reach us at 248.828.3377 or visit vtcins.com.
This blog is for informational purposes only and is not intended as legal advice.