What Is Gap Insurance and Should You Get It?
Car insurance is an important topic for any driver because it helps protect your investment in the case of a car accident. However, there are more types of coverage than many people realize. Gap insurance has been available to drivers since the early 1990s, but it’s becoming much more common. So, what is gap insurance, and should you get it when you buy or lease a vehicle?
What is gap insurance?
According to Yahoo Finance, Guaranteed Asset Protection Insurance is an optional coverage. Drivers can add this when buying or leasing a new or used vehicle. Typically, you’d sign up for this coverage while getting the car, and the dealer or finance company will figure it into your car payments. Additionally, you have to have car insurance to get it.
So, what does gap insurance cover? Essentially, it comes in handy when the vehicle in question is a total loss someone has stolen it. Gap insurance mostly covers the amount owed on the vehicle that your traditional insurance won’t. Because of this, drivers aren’t left with negative equity in these unfortunate situations.
Buyers should know that their traditional car insurance company is only going to pay out what the car is worth. Remember, it has been depreciating since you drove it off the lot, which means the value of the vehicle will likely be lower than what you actually owe to the lender. Gap will, in most cases, pay off the rest of the balance.
However, drivers should know that Guaranteed Asset Protection Insurance may not cover all costs that your comprehensive and collision policy doesn’t. In fact, there are a few situations where gap insurance won’t foot the bill. Here are a few:
- Gap Insurance won’t pay deductibles
- Finance charges such as taxes and processing fees
- Mileage charges for leased vehicles
- Car repairs
- Vehicle damage or bodily harm from car accidents
- Any overdue payments
- Extended warranties
- Cost of replacing a vehicle
Filing a Gap claim
There are a couple of ways to file a gap insurance claim. In most cases, if you set up the policy through your lender, they will do it on your behalf. This means you’ll need to focus on filing the claim with your traditional insurance company. Ensuring that you have everything you need for it is important because, if not, it could also slow down the Gap claim. However, you may still need to submit certain documents.
However, setting up additional coverage through a company you trust may mean you may have to file the claim. Of course, this would still involve filing with your regular car insurance company first. You can do this online, by phone, or in person. You’ll need many of the same documents for your comprehensive and collision policy claim. These documents include things like the police report and the original sales agreement.
Gap insurance is one of the most inexpensive coverages a person could get. In fact, it could be as low as between $20 and 56 dollars per year. As mentioned, lenders may include this in your monthly car payments, which helps make it convenient. Having this type of coverage is a way to ensure you don’t have negative equity if your vehicle is either a total loss or if someone steals it. It’s at least worth considering because it’s for your financial safety.