GAP insurance is a policy that covers the gap between the worth of the car and the amount you would owe on the car if it meets with an accident or in case it is stolen. This type of insurance cover is offered by most of the insurance companies to customers to prevent unforeseen losses.
Vehicle owners who are unable to pay a huge sum as down payment at the time of purchase are recommended to opt for GAP insurance. But it is always better to review the documents before signing up for GAP insurance.
This type of insurance makes sense if the expense on repairing your vehicle is likely to cost you much more than what the vehicle is worth or its actual cash value. For instance, let us assume that you purchased the vehicle for $30,000 but you are yet to pay the initial payment. In case you meet with an accident and your entire car gets damaged. Then you find out that the auto insurance policy you have puts a valuation of the repairs that need to be carried out. You now find that the cost of repairs are higher than the ACV or actual cash value and the insurer pays most of it but you are still running short of around $3,000. Then the GAP insurance will take care of this expense, especially if you have taken a collision cover or comprehensive coverage.
Requirements for GAP Insurance
In general, all lease agreements will require GAP insurance. This is more essential for the buyer as it will offer guaranteed protection from unforeseen financial losses. GAP insurance is a wise option even outside these lease agreements.
GAP Insurance cover
There are different types of losses that are covered under GAP insurance such as vandalism, theft, accident, fire, and other natural calamities like hurricanes, tornadoes, floods, landslides etc. Sometimes, the surety company that offers GAP insurance will also cover the deductible and ease your financial worries to some extent. However, it will not cover unpaid lease or loan payments that are overdue, vehicles that don’t have both comprehensive and collision coverage, car equipment which is not factory installed, penalties on leased vehicles, or expenses related to extended warranty. These exemptions that are specified in the policy needs to be understood before agreeing upon the terms that these surety companies will give to you.
Prior to purchasing GAP insurance for your vehicle you must check to see if you do need GAP insurance in the first place.
