GAP Insurance

What is GAP Insurance?

GAP insurance is also known as Guaranteed Asset Protection or Guaranteed Auto Protection within the North American financial industry. This type of insurance covers the difference associated between the cash value of a car and the balance that is owned on the financing. GAP coverage is used on new and used small cars and trucks and some heavy trucks. There are some financing companies which require it to be used. You will be notified when you purchase a car on financing options if GAP insurance is required and you will be informed of the policy options you must have.

What Does GAP Insurance Cover?

GAP insurance generally covers the amount on the loan that is the difference between the value of the asset and the amount that is covered by a different insurance policy. There are some GAP policies which cover the deductible also. This coverage is marketed for high interest rate loans, low down payment loans, and some loans with 60 month or longer terms. The GAP insurance is usually offered by a finance company during the time of the car’s purchase. Generally, most of the auto insurance companies are able to offer this type of policy to consumers as well. There are two ways that people can get GAP coverage. The first way is to acquire an insurance policy that is sold by a broker. The second option would be a waiver agreement that would be sold by a Finance and Insurance Manager. The insurance industry regulates the first option while the second option is not regulated at all.

What Are the Cost Expectations for GAP Insurance?

Costs generally vary because of insurance companies having different rating systems and policies. However, usually GAP insurance is calculated as being around 5 or 6 percent of your physical damage costs. Therefore if your costs are $500, GAP insurance is going to add around $25 to the overall premium. Although some people are not willing to pay the price associated with GAP insurance, they find that it has a very prevalent value when they have gotten into a collision and need that coverage – even though they do not have it because they thought it was unnecessary. Having GAP insurance is essentially an element which ensures whether or not you will have to pay the remainder of the money you owe out of your own pocket.

What Are the Benefits of GAP Insurance?

Essentially, if you get into a collision and your car is damaged, it’s only going to be worth the actual cash value of the car at that point. Therefore, the money that you are going to owe on the car is always going to have a few thousand dollars left over, which is considered to be your ‘gap’. Having GAP insurance means that you are going to be able to have coverage for this so that you won’t have to pay the ‘gap’ amount out of your own pocket, which would be extremely difficult after you have just experienced a collision or other damage to your vehicle.

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