You’ve added a new vehicle to your life. Whether you have purchased new or used, on a dealer’s lot or through a private transaction, you have a few more decisions to make beyond whether your favorite teenager might be allowed behind the wheel. One of the items on your checklist should be GAP insurance. But what the heck is it? And do you really need it?
What is GAP Insurance?
Guaranteed Auto Protection fills in when the balance on your loan is greater than the value of your vehicle if it were totaled or stolen.
- GAP insurance is usually optional and is not covered by your regular vehicle insurance.
- There is no deductible.
- It does not pay if your car is salvageable. Your regular car insurance will cover that.
What does GAP insurance pay?
A GAP insurance policy pays based on actual cash value at the time of the incident, not a total vehicle replacement. Remember that most vehicles have their highest depreciation in the first months after they are purchased. In the event of an unfortunate accident or if your vehicle is stolen, GAP insurance fills the gap between your regular insurance and what is owed on your car loan.
Where should I purchase GAP insurance?
It might seem easier initially to roll the GAP insurance into your loan at the dealership, but you will save money by purchasing through your car insurance company rather than at the dealership. Once your vehicle loan is less than the worth of your purchase, you can cancel through your insurance company. That would not be possible through the dealership if you had added the GAP insurance to the life of your loan.
Why do I need GAP insurance?
- GAP insurance is a good idea if you lease rather than purchase. Your leasing company may even require it. It is prudent to check with Superior Insurance to verify you are getting the best deal.
- If your vehicle purchase is an SUV or other vehicle that depreciates at a faster pace than most vehicles on the road, GAP insurance will be a wise acquisition until the auto loan is less than the worth of your purchase.
When would I consider skipping GAP insurance?
- If you put greater than a 20% down payment on your vehicle, and your depreciation valuation is about the same, you may opt to not use GAP insurance.
- If your loan term is less than five years, you might opt out of GAP insurance, but again, check with us at Superior for your clearest option. It’s also a good idea to check your car’s market value to assist in your decision making.
There are many ways to spend your money today — some fun, and others necessary. GAP insurance helps keep you on the move with all the excitement in your life, despite times where circumstances beyond your control might occur. Contact Superior Insurance & Auto Tags today for peace of mind. We are here to help keep you on the road!