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Why is gap insurance option when purchasing insurance coverage for your vehicle?

Added: Thursday, September 15th 2016 at 8:49am by Gapcarinsurance
Category: Cars & Vehicles
Related Tags: car
 
 
 

What is GAP insurance?

Guaranteed Asset Protection (GAP) insurance is a policy that is consistently sold when you get a new vehicle. In a situation whereby, your car is stolen, the GAP insurance will cover-up the initial amount that you paid for your GAP and the amount you bought the vehicle like BMW, Audi etc. in the initial place. Isn’t it great?

Do you know that no matter how comprehensive your insurance company might be, you will be at loss if the BMW, Audi On average, a new car loses 60% after three years? For example, let’s say your car cost $18,000, so after 3years, your current value will be $9000, from your insurance company. You can see that it is not enough to buy a new car.

GAP insurance is designed to cover the difference between what your insurer pays out and, depending on the type of policy

GAP insurance is a designed policy that oversees the following;

• the amount you paid for the car 

• amount you still owe on the car

• amount it would cost you to buy the car presently

Who should buy it for my Car e.g. BMW, Audi or Honda?

If your personal car outright or have a lot of equity in it, you don't need gap insurance.

The vice president of auto product strategy, and design for Travelers Insurance, Bill Pearse made a word "Anybody who has an auto loan or lease and hasn't put a significant amount down should buy car gap insurance."

You are likely to use GAP if;

• You borrow a vehicle.

• Finance for 60 months or more.

• Roll negative equity from a previous vehicle loan into a new vehicle loan.

• Drive annually covering over 15000 miles

• Buy a vehicle that possess a high depreciation rate

Do you need GAP insurance?

GAP is very useful if;

You stop being in negative equity, because the amount you owe is more than the initial.

You might end up owing more than the value of your car if the down payment for your finance deal was small (say 20%)

You might end up owing more than the value of your car if the kind of car you bought loses value quickly

MORE ABOUT GAP


GAP insurance only pays out if your normal car insurance company says that the car is written off or unrecoverable.

Your car is less than 12 months old and you’re the first registered owner

Most fully comprehensive car insurance policies offer ‘new car replacement’ during the first 12 months of ownership.

However, be careful to read the terms and conditions of your policy for any restrictions or exclusions. Some policies will not offer new-for-old where the car:

• has been stolen

• is subject to an accident where the insured is at fault

You’re already covered by your finance agreement

If you’re using a finance agreement that already covers you for the difference between the ‘book price’ (official value of the car) and how much you paid, you don’t need to add GAP cover.

You could afford to make up for any shortfall in the insurance payout

Types of GAP insurance

• Finance GAP insurance

• Return-to-invoice insurance. 

• New car (or ‘vehicle replacement’) GAP insurance. 

 

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