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GAP Insurance

GAP Insurance


Published March 30, 2016

GAP insurance(guaranteed auto protection insurance), or GAPS as it is sometimes known is a special type of insurance that covers the difference between the balance still owing on a vehicle (whether on a loan or lease) and the actual value of the vehicle.

When it comes to insurance, most people will insure their cars against damage with an insurance company. When you are buying, loaning or leasing a new car, you might be offered GAP insurance by the dealership or told by friends that you should have GAP insurance. But what is GAP insurance and why is it offered?

What is GAP Insurance
GAP insurance(guaranteed auto protection insurance), or GAPS as it is sometimes known is a special type of insurance that covers the difference between the balance still owing on a vehicle (whether on a loan or lease) and the actual value of the vehicle.

New vehicles depreciate in value very quickly when you first purchase or lease them, if you have an accident where your car is written off or it may be stolen, your vehicle may only be worth a fraction of the balance you still have to pay on your loan or lease. Your insurance company will only pay what your vehicle is worth to cover your loss. This means that you have to pay the difference between the outstanding balance on your vehicle and the vehicle’s worth out of your own pocket. With GAP insurance or GAPS, you don’t have to cover anything – the GAP insurance takes care of the shortfall for you.

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The Benefits of GAP Insurance
1) Good for luxury vehicles – Luxury vehicles are the biggest risk group when it comes to depreciation. The initial cost of the vehicle means that the initial depreciation on the vehicle value is much greater than on other vehicles. GAP insurance covers that initial drop in value, so even if you have an accident or the vehicle is stolen in the first week of owning or leasing it, you are still covered.

2) Upside-down protection – If you end up with an upside-down car loan, even if your vehicle hasn’t been involved in an accident or stolen, GAP insurance will cover the additional costs. It can be used even if you decide to refinance your vehicle and end up owing much more on the vehicle than it is worth.

3) No deductible – GAP insurance doesn’t have a deductible that has to be paid, it is automatically paid out without any additional charges.

4) Peace of mind – One of the greatest benefits of GAP insurance is the peace of mind that comes with purchasing it. You don’t need to worry about the difference between your vehicle value and the outstanding loan, which is often the last thing you want to deal with if your car has been stolen or you have been in an accident.

The Downside to GAP Insurance
1) Time restriction – Most dealerships place a time restriction on GAP insurance. Most will not allow you to purchase GAP insurance if you have owned the car for more than a year, others will restrict the length of time that GAP insurance applies for. Some dealerships offer one year GAP insurance, others up to three years, make sure that you check the duration of your GAP insurance before you purchase it and compare it to the length of your lease or loan. You will want it to cover the length of your lease or loan.

2) Non-transferable – Just as warranties cannot be transferred between vehicles, GAP insurance can’t be transferred either. If you are planning to sell your vehicle within the first year of owning it, then GAP insurance may not be necessary.

3) Cost – the cost of GAP insurance often is the deciding factor for people. It is not too expensive, but you are adding another monthly cost to your budget. If your vehicle has a low purchase price (under $7,000) and retains its value well, then purchasing GAP insurance may be an unnecessary expense.
Contact Auto Maxx Battle Creek
234 E. Columbia Ave.
Battle Creek, MI  49015
Telephone
(269) 281-8101
Sales Hours
Monday
9:00a - 8:00p
Tuesday
9:00a - 6:00p
Wednesday
9:00a - 8:00p
Thursday
9:00a - 6:00p
Friday
9:00a - 6:00p
Saturday
9:00a - 4:00p
Sunday
Closed
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