Because of the nature of car buying, the value of a vehicle depreciates once it's been purchased and driven off the lot—by as much as 20%! If the vehicle is totaled in an accident, you'll come to realize that because of this depreciation, there is a gap between the actual value of your vehicle and the fair market value offered by your insurers.
This is where GAP insurance comes in.
"GAP" is an acronym for "Guaranteed Auto Protection." A GAP insurance policy covers the difference between the actual cash value of the totaled vehicle and the current payoff of that vehicle. It can come in handy if you're ever in the situation where your vehicle has been totaled. Listed below are a few of the benefits you can expect from purchasing GAP insurance.
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GAP insurance often includes clauses on theft or defacement which can help safeguard an investment in a new or nearly new vehicle. Take a look at specific policies to see how a gap insurance "rider" fits into your existing car insurance setup.
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GAP insurance covers you should your vehicle become totaled and you find yourself struggling to make up the difference between the fair market value offered by your insurance company and the actual value of your vehicle.
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Your leased vehicle might be worth more than your insurer will pay in the event that you must make a claim. Price fluctuations often play a role in resolving claims, and many insurers find ways to lower their responsibility on basic liability claims. GAP insurance can put a stop to the headache of negotiating with insurers after a claim has been filed. Protecting a lease helps drivers protect themselves.
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You can choose to finance your GAP insurance over time.
Speak with your insurance provider about the benefits of GAP insurance. If you choose to invest, you could wisely be saving yourself thousands of dollars, should an accident ever happen.
