What is Gap Insurance?
A number of car insurance companies offer full comprehensive car insurance policies that offer only a new car replacement for the first year of ownership. This means that after that year, you will only receive payment up to the depreciated value of the vehicle - not what it would cost to purchase a new vehicle. Even though the car may still feel “brand new” to you, that's not the way the auto insurance companies see it.
So for example, let's say your car was stolen after you have only owned it for 13 months. In this case, if you were to get another brand new vehicle to replace the car that was stolen, your car insurance company may only pay you your car's current market value which is definitely lower than the car's retail price and you'll end up spending your own money to pay the difference. And if you still have a loan out on the car, then the money would actually have to go to the lender and then you would have even less money available to purchase a new car.
Gap insurance or guaranteed auto protection, in the incident of a total loss, is what covers the difference between your car's insurance payout or the car's current market value. It will also cover the actual money you paid for the car or money that you still owe from a car loan.
Having a gap insurance takes the risk out of your auto insurance policy not paying you enough in the event of a total car loss to due damage or theft. Some great gap insurance policies even cover the deductibles from your primary car insurance policy.
While gap insurance adds a great deal of value to your policy, it is also important to know though what it does not cover.
Gap insurance does not pay for things such as
- balance of a car financing if the vehicle is repossessed
- down payment for a brand new car
- carry over balances into your new car loan
- vehicle repairs (it only applies in the event of total loss)
Call us and we'll connect you to our licensed car insurance agent to assist you with your gap insurance needs and provide you more information about gap insurance. We guarantee personalized service, detailed information on gap coverage and to help you get an auto insurance policy that's just right for you.
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