Gap insurance (also known as Guaranteed Asset Protection or GAP) is an important form of protection for anyone who owns a car. Though it’s not required by law, it’s a worthwhile investment because it covers the difference between what you owe on your car loan and the actual cash value (ACV) of your car in the event that it’s totaled or stolen.
In other words, gap insurance helps protect you from being stuck with a bill for thousands of dollars for a car you no longer have. Let’s take a look at why you need auto gap insurance coverage and how to get it.
This type of coverage may be especially important for anyone who has recently purchased a new vehicle.
Let’s take a closer look at auto gap insurance so you can determine whether it makes sense for you.
Why Do You Need Gap Insurance For Your Auto
Having auto gap insurance coverage can be essential if you are financing your car purchase. Many times when people buy cars they will opt to finance them on credit instead of paying cash upfront. This means that even after making payments towards the total cost of the car, they may still owe more than what it is worth if something were to happen to their vehicle.
The reason for this is that cars depreciate in value over time, and so even if you pay off most of the loan balance, there can still be a gap between what you owe and what your car is actually worth due to depreciation. That’s where gap insurance comes in—it covers that difference so that if something happens to your car, you won’t be on the hook for thousands of dollars above its current market value.
When Do I Need Gap Insurance
Gap insurance can be helpful anytime there’s a large discrepancy between what you owe on a vehicle and its actual cash value—especially when buying or leasing a brand-new car.
That’s because cars typically depreciate quickly in their first few years, so if something were to happen to them in that time frame, they could end up being worth less than what was owed on them even though they were just purchased.
If this happens to you without gap coverage, you could end up owing money on a car that no longer exists! Additionally, if someone else was at fault for an accident involving your car but their liability limits weren’t enough to cover what was owed on your loan, then gap coverage could help make sure everything gets paid off.
What Does Gap Insurance Cover?
Auto gap insurance covers the difference between the actual cash value (ACV) of your vehicle and what you still owe on it—the “gap” we mentioned earlier. The ACV is determined by subtracting any depreciation from what you initially paid for the car, plus taxes and fees.
So if you total your car or it gets stolen and your insurer determines that its ACV is $20,000 but you still owe $25,000 on it, then gap insurance would cover up to $5,000 of that remaining balance. Without gap insurance, this difference would come out of your pocket.
How Much Does Gap Insurance Cost?
The cost of gap insurance varies depending on how much coverage you get and from which provider; however, typically it costs anywhere from several hundred dollars per year up to several thousand depending upon how much protection you want.
Some dealerships also offer gap coverage as part of their financing packages when purchasing or leasing vehicles from them; however, it is usually more expensive than rates offered by independent insurers such as Metric Marketing Group Incorporated (MMGI). MMGI offers specialized auto policies including gap coverage starting at just $10/month—an affordable way to give yourself peace of mind when driving around in your shiny new ride!
How to Get Auto Gap Insurance
Most dealerships offer gap insurance coverage when someone buys a new or used vehicle from them. However, these plans are often quite expensive compared to those offered by independent providers.
Additionally, many auto insurers offer gap coverage as part of their comprehensive packages; some even include it automatically in certain policies without any additional cost. So make sure you check with them first before buying anything else!
Finally, don’t forget that some credit cards come with free auto gap insurance coverage as part of their rewards programs—so if yours does, make sure to take advantage of this great benefit!
Auto gap insurance coverage can be an essential form of protection for anyone who owns a car—especially those who are financing their vehicle purchase on credit rather than paying cash up front.
The good news is that getting auto gap insurance doesn’t have to be difficult or expensive; many dealerships offer plans but independent providers often have better prices. Plus, many auto insurers include gap coverage automatically in certain policies without any additional cost, and some credit cards provide free auto gap insurance as part of their rewards programs.
Ultimately, having auto gap insurance can help protect you against owing money on a totaled or stolen vehicle long after its actual cash value has dropped significantly due to depreciation—making it well worth considering when shopping around for car financing options!