What Is GAP Insurance and Is It Worth Buying?
So, what is GAP insurance anyway? Guaranteed Asset Protection insurance – GAP like it sounds, covers the gap or difference between what is owed on an auto, rv, boat etc. and what the insured value at time of loss is. Consider this example: You buy a new car and put little or no money down. In addition, you add an extended warranty, paint protection, upgraded alarm and of course have California tax and license fees too. By the time you add all this up, you might find yourself financing the car for 10 percent more than it’s worth when you drive it off the car lot! If you are unfortunate enough to total the car in the first year of ownership, you might find yourself receiving less money than you still owe. This upside-down position is what GAP insurance is designed to cover.
Is GAP insurance required?
Most lenders don’t require GAP insurance, but this does not mean you don’t need it! Regardless of whether you lease or buy your vehicle, GAP insurance may be a must in the first year or two. This is especially true in California whenever automobiles are in high demand and prices rise. That creates the situation where buyers finance more money than their insurance will cover, and they are at a financial risk. Buyers are often unaware of their upside-down position. Read more on this site here: 5 Worst Auto Insurance Mistakes We All Make.
When don’t I Need GAP?
There are circumstances in which you do not need to purchase GAP. If you pay cash or at least 30% down for a vehicle at normal retail value, you should not need GAP. In the event you total your car, you won’t owe more than what your insurance would provide for payoff. In other words, you are not in a GAP situation.
Another situation in which you don’t need to purchase GAP insurance deals with car leasing. Car leases often have GAP insurance built in. So you would not need to purchase additional GAP coverage.
Where can I buy GAP?
You can purchase GAP insurance through the finance department at most dealerships. But be aware that this can be a fairly expensive option. Alternatively, you can purchase through authorized sellers as well as from many auto insurance companies. They often offer it for newly added vehicles at a small fee.
Pretty much like all insurance, you really don’t need GAP insurance until that unfortunate day that you do. So, before you dismiss GAP coverage, make sure someone helps you determine if you have a need or not. If you want assistance call Chris Wilson at (619) 980-7263.
