GAP stands for Guaranteed Auto Protection. GAP insurance covers the difference between what the car is worth and what you owe on the car. GAP comes into play if the car is stolen or damaged to the point that repair would cost more than the car is worth while the owner is still making payments. So you may be wondering when and how exactly will GAP auto insurance be beneficial to you. Worry not, the answer is here.
Benefits
Since you will be paying an additional sum to your premium, it is recommended that you go in for a GAP insurance only if the car is new or pretty expensive. Most of the auto insurance dealers give GAP insurance only to cars that match a certain criteria. This helps in you when you quickly want to replace your car in the case of an accident as you get the insurance amount for the same price of the car. Busy drivers often don’t have time to try to find money for a car deal in an emergency, as they may need the vehicle to commute to work each day.
GAP also offers indirect financial Security. As mentioned above, GAP insurance provides protection against charge offs and credit liabilities from defaults on auto loans that end badly, say for instance in the case of an accident. Having GAP insurance in place facilitates the proper closing out of an auto loan that no longer applies to a working vehicle.
Case In Point
For a clear example, let’s assume you take a loan and buy a car for $25,000 and you meet with an unfortunate accident which renders the car totally unusable. As your car is insured you file a claim with your insurance company. When the claim is made, auto insurance values the car at only $20,000. However, the loan amount including interest and taxes is at, say $26,500, and the lender still wants the full amount owed by the driver. GAP pays this $6,500 difference. With the following advantages, you can be sure of why you should go in for GAP auto insurance when you are buying a new car.