If you have purchased a new car, you may have been offered a gap insurance policy to help cover the costs of any unforeseen circumstances. In this article, we will explore what gap insurance auto is, what it covers, and whether it is worth the investment.
What is Gap Insurance Auto?
Gap insurance auto, also known as guaranteed auto protection (GAP), is a type of insurance policy that covers the difference between the amount you owe on your car loan and the actual cash value of your car in the event of a total loss.
In other words, if your car is declared a total loss due to an accident, theft, or natural disaster, your standard auto insurance policy will only cover the actual cash value of your car at the time of the loss. However, if the actual cash value of your car is less than the amount you owe on your car loan, you will still owe the difference.
This is where gap insurance auto comes in. If you have gap insurance, your insurance provider will cover the difference between the actual cash value of your car and the amount you owe on your car loan, so you don’t have to pay out of pocket.
What Does Gap Insurance Auto Cover?
Gap insurance auto covers the difference between the actual cash value of your car and the amount you owe on your car loan in the event of a total loss. This can include:
Events Covered |
Events Not Covered |
Accidents |
Minor damage to your car |
Natural disasters |
Mechanical breakdowns |
Theft |
Driving under the influence |
Vandalism |
Intentional damage to your car |
It is important to note that gap insurance auto only covers the difference between the actual cash value of your car and the amount you owe on your car loan. It does not cover other expenses, such as your car insurance deductible, or any extra payments you may have made on your car loan.
Is Gap Insurance Auto Worth It?
Whether gap insurance auto is worth the investment depends on your individual circumstances. If you have purchased a new car with a large car loan and a low down payment, you may be at risk of owing more on your car loan than the actual cash value of your car.
In this case, gap insurance auto may be a wise investment, as it can protect you from having to pay out of pocket in the event of a total loss. However, if you have a small car loan or a large down payment, you may not need gap insurance auto, as you may not be at risk of owing more than the actual cash value of your car.
FAQ
What is the cost of Gap Insurance Auto?
The cost of gap insurance auto can vary depending on your insurance provider, the make and model of your car, and other factors such as your driving history and your credit score. Generally, gap insurance auto costs between 5% and 10% of your standard auto insurance policy.
Can I cancel Gap Insurance Auto?
Yes, you can cancel your gap insurance auto policy at any time. However, if you cancel your policy before the end of the term, you may not receive a refund for any unused portion of the policy.
Do I need Gap Insurance Auto if I lease a car?
If you lease a car, gap insurance may already be included in your lease agreement. However, it is important to read your lease agreement carefully to determine whether gap insurance is included and what it covers.
Can I purchase Gap Insurance Auto after I have purchased my car?
Yes, you can purchase gap insurance auto after you have purchased your car. However, it is generally recommended that you purchase gap insurance auto at the same time as your car to ensure that you are fully covered in the event of a total loss.
Does Gap Insurance Auto cover my car’s depreciation?
No, gap insurance auto does not cover your car’s depreciation. It only covers the difference between the actual cash value of your car and the amount you owe on your car loan.
Conclusion
Gap insurance auto can provide valuable protection in the event of a total loss, especially if you have a large car loan and a low down payment. However, whether gap insurance auto is worth the investment depends on your individual circumstances.
If you are considering purchasing gap insurance auto, it is important to shop around and compare quotes from different insurance providers to find the best coverage and price for your needs.
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