Gap insurance, also known as Guaranteed Auto Protection, comes in handy when your car is totaled or stolen and the amount you owe on your loan is more than the car’s actual cash value. This can happen when your car depreciates quickly in the first few years after purchase.
For instance, if you bought a car for $30,000 and a year later it’s totaled or stolen, but the insurance company says its value is only $20,000 due to depreciation, you’d still owe $25,000 on your loan. That $5,000 gap is what gap insurance covers.
Who Should Consider Gap Insurance
If you’re leasing a vehicle, have a high loan-to-value ratio, have a car that depreciates rapidly, or have a long-term loan, then gap insurance could be a good idea for you.
Where Can I Get Gap Insurance?
You can get gap insurance from your auto insurer, car dealership, or through banks and credit unions. The cost varies but typically ranges from $20 to $40 per year when added to your auto policy. If purchased from a dealership, it can be a one-time charge ranging from $500 to $700.
Conclusion
To decide if you need gap insurance, consider your down payment size, loan term and interest rate, your car’s depreciation rate, and your financial situation. Gap insurance can be a valuable protection for many car owners, especially those with new, leased, or financed vehicles. Just evaluate your circumstances and make the decision that feels right for you!
Larrybohboh provides updates on everything you anticipate. Stay tuned for an episode on Business Interruption Insurance. Have questions about Gap Insurance? Ask in the comments for more details.