Guaranteed Asset Protection insurance, or GAP insurance for short, refers to a type of protection that seeks to prevent you from possible forfeiture of your assets. Normally, the asset referred to here is your car. When such an asset gets damaged, often due to road accidents, gap coverage will fill in the void or “gap” that your primary insurance policy will likely miss out.
You might ask how this can happen when your policy clearly provides for comprehensive coverage. Actually, this is a situation that many car owners are not aware of. When your vehicle encounters an accident, an insurer will pay you the market value of your car at that point in time. It does not matter if a car is newly-purchased; its value immediately depreciates upon purchase.
This is where problems can arise, particularly in cases where cars suffer total damage. An insurance provider will pay only a certain amount so you can get a new car. However, there is this issue about your car loan, assuming you acquired the vehicle under such an arrangement. If the payment forwarded is quite small, you will have to settle the loan with money that will come out from your own pocket.
With GAP insurance, such a situation need not arise. Such policies can conveniently cover all remaining balance on your car loan even if your insurer decides to grant you low compensation coverage.
You might think that GAP insurance is reserved only for people who purchased their cars on loan. In a way, this is true, but this insurance variant can also be quite useful for people who own luxury cars. These vehicle types are considered high risk because they have greater chances of getting stolen or vandalized. When these incidents take place, insurers will apply the same procedure, i.e., they will only pay for the present value of the cars. If a balance exists somewhere, your gap policy should be able to take care of this.
Despite these tremendous benefits, people who purchase their cars on loan are often not offered gap coverage. Even if an offer is made, it comes under very difficult terms. For instance, in many cases, erroneous information is often provided. Specifically, some car dealers claim that they only offer gap policy on the day a car purchase was made. After that, coverage can no longer be provided.
Such a claim is untrue, because GAP insurance can be availed of all year round. You just need to do some researches so you can find an insurer that can provide such coverage. This should not be hard to do since there are several insurers that specialize in this kind of vehicle protection.