Gap insurance, or Guaranteed Auto Protection insurance, covers the difference between what you actually owe on the car and what the car is valued at for insurance purposes. Did you know, according to CARFAX, most cars lose around 20 percent of their value in less than a year of driving off the lot?
Without gap insurance, if your vehicle is stolen or totaled, you could end up owing more than insurance will pay you. Paying off a car you can’t even drive isn’t exactly ideal.
How Gap Insurance Works
If you paid $25,000 for your brand new car, but got into an accident totalling your car seven months later, you may still owe $23,000. However, your car now has an actual cash value of $20,000. After your deductible, you are paid $19,500 from your insurance company. Gap insurance could pay you the $3,500 difference.
For many people, gap insurance provides an added sense of security. Even though gap insurance will add to your monthly car payment, it is a small price to pay if you end up needing it.
Is Gap Insurance Right for You?
When it comes time to buying or leasing a vehicle, chances are you’ll be overwhelmed by the amount of decisions you need to make. Should you lease or buy? Should you purchase extended warranty? Do you need all-wheel drive?
We’re here to let you know, gap insurance isn’t for everyone. If you’ve already paid off your vehicle, there is no reason to purchase gap insurance. Insurance Information Institute recommends you consider gap insurance if you:
- Made a down payment less than 20 percent
- Financed your vehicle for 60 months or longer
- Purchased a vehicle that depreciates at a fast rate
- Rolled over negative equity from an old car loan into the new loan
Ultimately, you have to decide if gap insurance is right for you.
Regardless of how safe you are on the road, how many times you checked your blind spot, or are SURE you gave yourself enough distance between your car and the one in front of you, accidents happen. When you find yourself in a pinch and needing help, contact Bart Durham Injury Law. Remember, your first consultation is always free.
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