What is Gap Insurance Coverage for Car?
Guaranteed auto protection (GAP insurance) is special insurance for drivers who may experience trouble paying off their auto loan or lease if their car is either stolen or totaled. You need to understand how a GAP insurance policy works before you can consider buying it.
How GAP Insurance Cover Works?
If you get involved in an accident and wreck your car, the collision coverage of your car insurance (if you have this policy) will not pay for you to replace your vehicle with a new one. Instead, you will receive a cheque for the car’s comparable market price. It is known to insurers as the actual cash value of your vehicle. Cars depreciate quickly during the first few years. As a result, the owner may end up owing the lender more than the car is worth, significantly if you invested very little money initially. On average, an automobile depreciates by two thirds after just two years of driving.
GAP insurance cover takes care of where you fall short. Suppose you acquired a car at $30,000, and it was stolen after two years and never recovered. The car severely depreciates during the first couple of years. The car’s market value is now $21,000, although the money you owe the lender is $24,000. GAP insurance will come in and help you settle the $3,000 difference.
Even though GAP insurance saves you from saving the $3,000 out of pocket, you must understand that the amount you will receive from your insurance company is $21,000. That is the amount you get to replace your former $30,000 car. GAP insurance will not cater to this particular loss.
Who Needs GAP Insurance?
GAP insurance is optional, and some drivers may not need it. It may help people who are leasing a car, have a loan payoff period of over five years, or buy a vehicle that depreciates quickly on average. GAP insurance may also help people who drive many miles, making the vehicle to depreciate faster.
How to Crack the Best GAP Insurance Deal?
When you buy a car, the dealer may want to sell the car’s gap policy to you before you leave with the vehicle. However, it may be vital that you shop around for better deals. A dealership is generally expensive, and you may need to go with a major insurer.
Generally, a significant insurer may price the GAP insurance policy at 5% to 6% of the comprehensive and collision premium on the auto insurance policy. You can also terminate the GAP insurance contract once your loan balance is below the value of the car. You can check out websites like QuietQuote for fast and easy ways to obtain a good car insurance deal. It is the best free auto insurance quotes marketplace.
Cars not covered by comprehensive and collision insurance cannot be eligible for GAP insurance claims. GAP insurance coverage is useful to people who have a large deficit in the equity of their car. You can also drop the GAP insurance once you feel it does not make financial sense.
To take more informed decision , reach our specialists at QuietQuote