Understanding Gap Insurance
Gap insurance, short for Guaranteed Auto Protection, is a type of car insurance coverage that helps drivers cover the “gap” between what they owe on their vehicle and the car’s actual cash value (ACV) in the event of an accident. Often, after a car wreck, our clients find themselves dealing with a totaled vehicle that is worth less than what is owed on their loan. This is where gap insurance steps in to bridge the financial gap.
When Should You Consider Gap Insurance?
If you’re contemplating whether or not to purchase gap insurance, there are specific scenarios where it might be particularly beneficial:
- Low Down Payment: If you have put down less than a 20% down payment on your vehicle.
- Long Financing Terms: If you have financed your car for 60 months or longer.
- Leased Vehicles: If you are leasing a vehicle.
- Rapid Depreciation: If you have purchased a vehicle that depreciates faster than the average.
In these cases, purchasing gap insurance along with your standard coverage can offer vital financial protection.
What Does Gap Insurance Cover?
Besides covering the “gap” after a car wreck, gap insurance can also cover other events that cause damage to your vehicle:
- Theft: If your car is stolen and never returned, gap insurance may cover the remaining balance between your car’s ACV and what you owe on the loan.
However, it is important to note that gap insurance does not cover:
- Deductible Costs: You will still be responsible for paying your insurance deductible.
- Engine Failure: Mechanical breakdowns or failures are not covered.
- Medical Expenses: Any medical costs resulting from injuries in an accident are not included under gap insurance.
Is Gap Insurance Right for You?
While gap insurance is optional, it is worth considering, especially if you meet any of the criteria mentioned above. This important coverage can help prevent financial stress over unpaid bills after an automobile accident where your car has been totaled.
Gap insurance is designed to protect you from the financial burden that can occur when your car is totaled and you owe more than its current value.