What Is GAP Insurance?

Guaranteed asset protection (GAP) insurance is a type of auto insurance that can cover the difference between the amount you owe on your car loan and the car’s actual cash value (ACV) in the event of a total loss. This can be particularly beneficial if your car is totaled in an accident or stolen, as it may ensure you are not left paying off a loan for a vehicle you no longer have.

How Does GAP Insurance Work?

When you purchase a new car, its value begins to depreciate the moment you drive it off the lot. Standard auto insurance policies can typically cover the car’s ACV, which can be significantly less than the amount you paid for the vehicle due to deprecation.

If your car is totaled or stolen, your insurance may pay out the ACV, but you might still owe more on your loan or lease than the car is worth. This is where GAP insurance comes into play. It can cover the disparity, or gap, between the ACV and the remaining balance on your loan or lease.

Who Needs GAP Insurance?

GAP insurance is particularly useful for certain car owners. This coverage may be a top priority if the following circumstances apply to you:

• You’ve purchased a new vehicle with a small down payment. The smaller your down payment, the larger the initial loan balance, increasing the likelihood of a gap.

• You’ve leased a new vehicle. Leasing often involves lower monthly payments but higher potential gaps between the car’s value and the lease balance.

• Your vehicle quickly depreciates in value. Some cars lose value faster than others, making GAP insurance a wise choice.

• Your auto loan has a particularly long term. Loans with longer terms can result in slower equity buildup, increasing the risk of a gap.

GAP Insurance in Anderson, SC

Contact Select Insurance today to learn more about GAP insurance and ensure that your auto coverage is sufficient for your needs.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.