What is Gap Insurance coverage?

According to Wikipedia, "Guaranteed Auto Protection (GAP) insurance is also known as GAPS and was established in North American financial industry, GAP insurance is the difference between the actual cash value of a vehicle and the balance still owed on the financing (car loan, lease)." So having said that, we need to understand what actual cash value is, as well as what would still be owed on your financing option to really fully understand loan or lease gap insurance coverage. Actual cash value is the amount of money the insurance company is willing to pay you for your vehicle in the event of a total loss. Gap insurance coverage is the insurance that will pay the difference between what you owe on your vehicle and what the actual cash value amount was from the insurance company at the time of the loss. The problem with actual cash value insurance is that your vehicle is depreciating as you drive it off the lot, and sometimes your vehicle depreciates faster than you are paying it off via your financing option whether it be through an automotive loan or automotive lease. 

When would I need gap insurance?

Let's talk about a hypothetical scenario that will help clarify exactly when and where you would need gap insurance coverage. Let's say that you bought a brand new SUV and you drive it off the lot, you felt that financing through a loan was the best route for you to go when purchasing the vehicle. So far so good. You are driving around, to and from work, taking a couple weekend trips, a few weeks has passed when you are turning right at a stop sign, the oncoming truck blows through their stop sign and smashes into the back of your SUV. Luckily you are fine, the only damage done is to your new vehicle. The insurance company adjusts the loss and determines that it is a total loss. This is where your actual cash value would come into play, they say that they will pay you $32,000 for the SUV as it is totaled. That sounds great, but you owe $38,000 on your vehicle loan to the financing company. Where is that extra $6,000 going to come from? If you didn't have gap insurance coverage, you might be paying for all of that $6,000 out of your own pocket. Not a good day! Luckily, because you thought ahead and talked to your local agent (hopefully us here at Cobos Insurance Center!) you have the proper gap insurance coverage and you don't need to worry about a thing other than picking out a new SUV. 

Like one of carriers, Grange, says; You’d hate to think you’re unlucky, but it happens all the time. People drive their brand new ride off the lot and shortly thereafter find themselves in a total loss accident. How much do you still owe on your loan or lease, and are you willing to pay the difference between that and your car’s actual cash value if you got in an accident?


Connect with Us!

If you have further questions about gap insurance coverage in Ohio, give us a call or shoot us an email today! We want to write posts about your favorite topics, be sure to interact with us on social media and let us know what you would like to see! You can connect with us through the following channels… 

Facebook

Twitter

Instagram

Simply click the links above to connect with us and give us some feedback on our blog!


Posted 5:45 AM  View Comments

Share |


No Comments


Post a Comment
Name
Required
E-Mail
Required (Not Displayed)
Comment
Required


All comments are moderated and stripped of HTML.
Submission Validation
Required
CAPTCHA
Change the CAPTCHA codeSpeak the CAPTCHA code
 
Enter the Validation Code from above.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive


View Mobile Version