What is Gap Insurance?

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Gap insurance stands for Guaranteed Asset Protection insurance. Gap is an optional type of auto insurance that protects drivers who decide to finance or lease a vehicle. This type of insurance helps cover the difference between the amount a vehicle is worth at the time of a total loss and the amount of that is still owed on the loan or lease.

 

How Gap Insurance Works

When a driver buys a new vehicle, its value decreases overtime due to depreciation. In case of an accident or a stolen vehicle, your regular auto insurance generally pays the vehicle’s current market value. Gap insurance, however, can cover the amount you originally paid. For example, if a car is worth $20,000 but you still owe $24,000 in loans, your regular insurance can pay the approximate $20,000. Having the additional Gap insurance can help cover the remaining $4,000, subject to the policy’s limits and terms.

 

Who Can Benefit from Gap Insurance

Gap insurance can be helpful for people who:

  • Finance a vehicle for a long period of time.
  • Make a small down payment on a vehicle.
  • Purchase a vehicle that has a quick depreciation.
  • Have a loan balance that is higher than the vehicle’s current value.
  • Lease a vehicle.

 

What Gap Insurance Usually Covers

Generally, Gap insurance covers the difference between the vehicle’s insurance settlement and the remaining loan balance after a covered loss. However, the coverage varies depending on your insurer. Gap insurance may not cover late fees, overdue payments, extended warranties, or some additional charges.

 

Overall, Gap insurance can be helpful for those who lease or finance a vehicle. It provides protection against the effects of vehicle depreciation. If something happens to a vehicle while you owe more on it than its current value, Gap insurance can help pay the difference.

 

You can experience the benefits of being a part of a full-service Independent Insurance Agency today! Simply contact Briggs Agency, Inc. if you are interested in an insurance review at 219-769-4840 or visit our website at www.BriggsAgency.com. We look forward to hearing from you!

Blog written by: Sara Trajanoska