Auto GAP insurance, or Guaranteed Asset Protection Insurance, is a kind of insurance policy where your assets are totally protected from forfeit. With this type of insurance, your insurance company will pay you for both the value of your car and how much you still owe on it. This insurance is definitely useful because it fills the “gap” that physical car insurance has missed out. If you encountered an accident and you do not have GAP, you will still pay a fortune for expenses even though you have comprehensive or collision insurance. Why is this?
It is because an insurance company would only pay you the “market price” of your car at the time of the incident. Oftentimes, a car’s market price is way below the amount of money the owner still owes on it - and that is where the problem begins.
After your car gets “totaled” in an accident, an insurance company will declare the car to be their property and will provide you “assistance” to buy a new car. However, you will still pay for your auto loan on the car, which puts you into an “upside-down” dilemma. The function of GAP insurance in this situation is to pay the gap between the money your insurers paid you and the amount you still owe on your car.
Purchasing GAP is recommended to car owners who are leasing their cars. It is also good for high risk vehicles such as luxury cars because they are more likely to be stolen or vandalized. If these things occur, the insurance company will only pay for market value (which it declares) of the car, and the owner is left to pay an auto loan for a car he does not own.
Because of the benefits it offers to its clients, many car dealers often do not offer GAP insurance to their customers. Even if they do, they charge really high fees compared to the normal rates from other companies specializing in this insurance. In addition to that, do not believe car dealers who claim that this insurance can only be bought from them within the day of car purchase. You may get GAP within the first twelve months after purchase, however, the longer you wait to get it, the lesser your reasons of having it.
Getting GAP insurance may be an additional expense for others, but for those who have benefited from it, it is a good investment. It may only cost a few dollars, but it will surely aid you in time of trouble.