Land is the only asset that appreciates. Value of cars, on the other hand, depreciates significantly fast. In fact, its value plummets as soon as you buy and drive them away the sales lot. Well, it is life, and we cannot do anything about it. However, what if the vehicle you just purchased would be involved in a road accident just a few months (or weeks) after you got it? This is where gap insurance comes into play.
Many people are not familiar with this type of insurance primarily because policyholders and agents seldom talk about in deals. Gap is actually an acronym for Guaranteed Asset Protection. As the name suggests, it covers certain things that other regular coverage does not. So, what does it cover exactly? It is the difference between market value of the automobile and remaining amount you owe on it. It is a wise decision to get it as soon as you buy a car. Your vehicle’s market value at this time is still high, so in case of accidents or theft, you can still receive high compensation, thanks to gap insurance.
Most drivers do not know that at the instant a newly-purchased car leaves a sales lot, its value depreciates by nearly 20%. The longer your auto stays with you, the lower its market value gets. By the time your vehicle gets stolen or gets severely damaged in a road mishap, insurers would only pay you the car’s market price. By getting gap policy, you secure your car’s chances of getting replaced. It also protects you against insurers and car dealers who want to take advantage of you.
One of the many good things about gap insurance is that it is affordable. Your money will not go to waste since they will compensate extra financial assistance just in case your insurer does not provide enough protection. However, here is the catch: you should get it at the soonest possible time, or as earlier stated, immediately after purchasing a car. There is no room for buying time. If you wait longer before applying for this kind of insurance, you will see that you have fewer reasons to get one. When you finally decide to get one, the market value of your car would be about equal to what you owe on it.
However, what if you finance your vehicle, do you still need to get gap insurance? Well, it depends partly on the coverage. It is not advisable to apply for such policy if your regular auto insurance policy will fully pay the financed amount.