Due to the necessity of using a car, combined with the bad economy we are experiencing, it is already common for consumers to have their car by the way of loaning or leasing it. Automobile loans and leases are very popular to the public who do not have enough cash to buy a car but still needs one, whether in their job or due to their location. Meanwhile, even though you still do not fully own a car, as long as you are driving one, it does not reduce the chances of you being involved in road accidents, or your car getting totalled, maybe due to natural disasters like hurricanes and tornadoes or vandalism. In this situation, GAP insurance proves to be a very good deal, offering valuable protection for your car in its infant years.
Technically speaking, GAP insurance pays on a specific loan or probably a lease, the difference between the actual cash value and the current outstanding balance of your car, in case of a loss. In other words, GAP insurance offers protection to a car vehicle lease or loan. There are even times when it is the GAP insurance that will pay your regular insurance deductibles in case of such circumstances.
For instance, if your vehicle is involved in a car accident, or victimized by theft and vandalism, or maybe got into fire and natural disasters such as hurricanes, and is finally totalled, it is very likely that it is the cash value of the car (which is significantly lower than its retail value) that is going to be paid by your car insurance company. This amount, more often than not, is also significantly less when compared to the actual amount due to your lease payoff, or the amount that you still owe in your car loan. The amount that is between this financial loss on your part and the insurance deductible is the GAP that you can owe, and the one that is covered by GAP insurance.
Typically, there is a tendency that the owners of the car assume that if their automobile is totalled, this would be replaced by the amount that they actually paid, or at least even the amount that they actually owe, which is in fact not true. There are car insurance companies that offer, along with physical damage coverage, a GAP option as an optional coverage included. So, if you need protection for the car that you need the most while in its infant years, it is wise not to take the chance and avail GAP insurance.