What Is Gap Insurance
What is GAP Insurance?
When you buy or lease a new car or truck, the vehicle starts to depreciate the moment it leaves the dealership lot. Standard auto insurance policies cover the depreciated value of a vehicle, in other words, a standard policy pays the current market value of the vehicle at the time of a claim. If, when you financed the purchase of a new car and put down only a small deposit, the early years of the vehicle’s ownership the amount of the loan may exceed the market value of the car itself. In the event of an accident in which the car has been severely damaged or totaled, gap covers the difference between what a car is currently worth and the amount you owe.
When You Might Need GAP insurance:
- When you made less than a 20% down payment
- Financed 60 months or longer
- Leased a vehicle
- Purchased a vehicle that depreciates faster than the average
- Rolled over negative equity from an old car loan into the new loan
Does Everyone Need GAP Insurance?
Not everyone needs GAP insurance, and if you don’t fall into any of the categories above (a car loan, a car with a heavy underwater loan, or a lease), you can skip this coverage. If you owe less than what your car is worth or you own your car outright, you can skip the GAP coverage. If you own your vehicle outright (i.e., you don’t have a loan) your standard insurance should be sufficient to cover a loss. If you own your car and it is totaled, your insurance will pay you what the car or truck is worth.
You can add GAP insurance when you finance your vehicle with our friendly finance manager. The finance manager will go over your options with you when you are signing your paperwork here at Columbine Ford.