What is Gap Insurance and Why You Should Have It

What is Gap Insurance and Why You Should Have It

If you’re financing or leasing a vehicle, you may have heard of Guaranteed Asset Protection (GAP) insurance. This type of insurance can provide added protection to auto owners in the event of an accident or theft.

Essentially, GAP insurance is designed to cover the “gap” between the actual cash value of a vehicle and what is owed on the loan or lease. When an accident occurs and the vehicle is deemed a total loss, the insurance company will typically pay the actual cash value of the car at the time of the loss. However, this amount may be less than what is owed on the loan or lease, leaving the auto owner responsible for paying the remaining balance out of pocket.

This is where GAP insurance comes in. With GAP insurance, the auto owner can rest assured that they won’t be left with a large bill to pay in the event of a total loss. Instead, the insurance company will cover the remaining balance on the loan or lease, up to the policy limits.

It’s important to note that GAP insurance only applies in certain situations. Specifically, the vehicle must be considered a total loss from an accident or theft without being recovered. If the vehicle is repairable or is recovered after being stolen, GAP insurance typically won’t apply.

Some people may be skeptical of GAP insurance, thinking that it’s just another way for insurance companies to make money. However, it’s important to understand that GAP insurance is not a scam. Rather, it’s a useful tool for protecting a depreciating asset that you’ve invested a lot in. If you’re financing or leasing a vehicle, it’s worth considering whether GAP insurance makes sense for your situation.

As with any type of insurance, it’s important to read the fine print and understand the policy limits and exclusions before purchasing GAP insurance. An experienced personal injury attorney can help you navigate the ins and outs of insurance policies and ensure that you’re getting the protection you need.