What is GAP Auto Insurance Coverage
GAP (Guaranteed Auto Protection) insurance coverage is a product which is put in place to benefit vehicle owners who have an outstanding loan on their vehicle. It is used to pay the difference between what they owe on their car and its cash value if the car is totaled in an accident.
Total Loss of a Vehicle
When a car is deemed to be a total loss following an accident, the auto insurance company pays out based on its cash value. The owner is not entitled to compensation for the car’s original selling price or its replacement cost.
Since vehicles depreciate rapidly, it’s possible for an owner to owe more on the car than its cash value. After the accident, the owner’s insurance company will pay out on the claim, less the owner’s deductible. The amount of the outstanding loan on the vehicle must still be paid.
GAP Auto Insurance
GAP auto insurance coverage is used to make up the difference between the car’s worth and what the owner still owes on it. It will pay off the outstanding balance on the loan to the financing company.
A lender may allow a vehicle owner to buy another car following a total loss, but the amount owing from the previous vehicle will be added to the new amount being financed. The owner will have to continue making payments for a car he or she can no longer use.
Where to Buy GAP Insurance Coverage
There are two ways that a car owner can get GAP coverage. Companies providing auto financing may offer it to customers when they apply for a loan. The GAP coverage would be provided through an insurer the lender has a professional relationship with. This choice is a very convenient one for the borrower, but it doesn’t allow for comparing rates and coverage terms from different providers before making a decision.
Auto insurance companies also provide GAP coverage, and it can be added to an auto insurance policy along with the liability and physical damage coverage needed for a new car. A driver who is interested in adding this protection to his or her policy will get the best rates by shopping around and getting quotes from different providers before making a buying decision.
Shop Around for Best Auto Insurance Coverage Rates
Buying a new car is a perfect time to look for a new auto insurance provider as well. This amounts to a change in circumstances for the consumer. Since a new car will likely be more expensive to insure, getting quotes from different providers is a good way to find the company which can offer the best deal on the type and level of coverage the driver needs to protect the new vehicle.
Drivers who have an outstanding loan on their vehicle can benefit from having GAP insurance coverage in place. It will help them avoid being in a situation where they are still financially responsible for making payment on a vehicle they can no longer drive.