Gap Car Insurance Coverage
Gap car insurance, or “guaranteed auto protection” insurance, is insurance that covers the difference between what a driver owes on a car loan to a bank or lender and what the driver’s car insurance company will pay for its value, preventing the driver from being liable and paying the difference out of pocket in case of a collision or accident. Gap car insurance coverage is affordable when you compare auto insurance quotes to find the best, yet cheap policy available.
Why Is There GAP Car Insurance Coverage?
Insurance companies will only payout claims for the actual present cash value of a vehicle. Car insurance companies only make you whole again based on your loss. This means a car insurance company’s payout on a total loss claim will be approximately what they think your car is worth, not the sticker price of the vehicle or what you owe on the car loan.
A car depreciates faster than you repay your loan. Car insurance companies estimate that within 2 or 3 years, and depending on the vehicle’s make and model, most cars lose about 50% of their value. Therefore, depending on how much of a down payment is made during the purchase, there will most probably be a difference between what is owed to the bank on your car loan versus the car’s present, depreciated value. Naturally, you are liable to the lender for this difference.
How Costly Could This Difference Be Without GAP?
It depends on several factors, including time, initial value of the car, car’s make and model, the vehicle’s depreciation and how well it is able to retain value, after market prices, etc.
For example, a driver buys a new car for $25,000. The bank or lender loans you the full $25,000. One year later, the driver and vehicle are involved in a car accident, and the car is totaled. If the car is valued $20,000 after a year, and you have paid down the bank loan to $24,000, then you are liable for the difference of $4,000.
If you have Gap insurance with adequate coverage, then you will incur no out-of-pocket expenses. Gap insurance is important because it protects from unexpected incidents like this. For consumer protection, most leasing companies, lenders, and banks require drivers of new cars to carry full coverage and Gap insurance when taking out a loan or seeking financing for their new car purchase.
Car Insurance Quotes With GAP Coverage
Shop around and get online quotes here at MyCarInsuranceRates.com for cheap gap car insurance coverage. It can save you from being unexpectedly liable after an accident and the rates for the amount of coverage is so minimal that it is almost always worth it.
Enter your zip code to begin a car insurance quote now, and start saving money now and in the future with gap car insurance.
