Picture this: you just purchased a new car and are informing your insurance company about it so that they can update your auto insurance. After finding out how much you paid for the car and looking up some specs in their database, your insurance agent advises you to get GAP (Guaranteed Asset Protection) insurance.
Obviously, you’ve never heard of GAP insurance before, so you ask a few questions. What is GAP insurance? Why do you need it on your financed vehicle? How much will it cost on top of your standard auto insurance policy? Here are some of the answers to those important questions.
What is GAP Insurance?
As the name implies, GAP insurance is designed to fill in the gaps in your auto insurance coverage. Look at it this way, when you purchased your vehicle, you more than likely decided to finance part of it. Over time, as you make payments to the financing company, the overall value of your vehicle will go down, probably faster than the balance of that loan. This leaves you in a bit of a sticky situation should something happen to your car.
A Quick Example
For example, if your car is in an accident and is declared to be totaled, you’ll receive a check from your insurance company for what they decide is the car’s value. This is based on things like age, milage, and wear and tear, not on how much you owe on the car. As a result, you may not receive enough money to pay off the loan, let alone an amount that will also provide you with a small down payment on a new one. You could end up paying quite a bit out of pocket for a car that you no longer can drive.
Where GAP Insurance Comes into Play
What do you do? Rather than reach for your wallet, contact the insurance company that holds your gap policy. Usually, this is the same company as your primary car insurer, so it will be easy to get ahold of them regarding your policy.
As you can see, GAP insurance is designed to pay the difference between the amount of coverage on your standard policy and the overall balance on your loan. It will protect you so that you don’t have to pay anything out of pocket if your car is totaled or stolen.
Do You Need to Have GAP Insurance?
While you might be able to get away with not having GAP insurance, some lenders require it, so the decision may not be yours alone. With that said, since GAP insurance is fairly inexpensive compared to standard car insurance premiums, it makes sense to have it in place, just in case. There’s no such thing as having too many insurance protections. After all, you never know what will happen. You don’t want to be caught unaware and having to pay out of pocket for something that a GAP insurance policy would easily cover.
Have Questions? Contact Charlotte Insurance
Wondering if you need GAP insurance? Contact Charlotte Insurance. Our agents can explore and explain all available options with you and put together the coverage plan you need.