GAP insurance. It sounds like what you might need for your next visit to the dentist. Insurance to repair that unsightly space between your teeth.
GAP Insurance, in fact, is an automobile insurance term. It actually means, “guaranteed auto protection.” It has to do with discrepancy between what you owe for a vehicle and what the insurance will company will pay for it.
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Why Is There A GAP?
When a claim for a totaled automobile is submitted, insurance companies will only pay for the actual cash value of that automobile. This means they will only pay for what the car is determined to be worth, not the amount that was paid for it. A difference exists because the car has depreciated in value since the time it was purchased. As you may be aware, an automobile depreciates the moment you drive it off the lot. The first time you drive your new car, it is already worth less than what it was paid for it only minutes before. Isn’t that nice?
How Costly Could This Difference Be?
Very significant, depending on how much value your car has lost since it was purchased. Let’s say you received a loan to buy a brand new car for $30,000. Everything was going great until about five months later, when you were involved in a collision. The brand new car is now a total loss. Well, its all good because you have insurance, right? Maybe it is. Then again, maybe not.
It depends if you had GAP insurance. The insurance company determines the actual cash value of your vehicle to be $25,000. Thus far, you have only made about $1500 in payments. You still owe $28,500, but the insurance is only going to issue you a check for $25,000. Guess where that extra $3,500 you still have left on the loan is going to come from?
This is why GAP insurance is important. It protects you. It’s so important, that most leasing companies and institutions will mandate that you carry this coverage when taking out a loan. However, this is not always the case, so make sure you have this insurance when getting a loan to pay for a car. Also, you can usually buy this coverage at any point during your lease, so shop around and get an online quote here at Cheap Quotes Car Insurance for the cheapest GAP insurance available.