If you are currently carrying a loan balance on your automobile, you may need gap insurance.
Every one knows how fast cars depreciate, and if you were not able to put at least 30 percent down, you may need to purchase gap insurance.
Gap insurance is an acronym for Guaranteed Asset Protection. The asset it is protecting mostly, is your bank account.
Let us say you borrowed 25,000.00 on your new car. Just because the bank approved that amount does not mean the car is worth that much to your insurance company. Your insurance provider may put a value of far less than that in the event of a total loss. If this is the case and your new car is deemed a total loss due to fire, theft, hail damage or any number of other catastrophic events, your insurance company will only pay the assessed value. If you owe more than that, you will be responsible for any outstanding loan balance. Imagine having to pay for a car that is sitting in the scrap yard. Ouch, that hurts.
However, if you purchased gap insurance, that loan balance could be paid for you. Once the insurance company has paid for their portion, the gap insurance policy will, in most cases, pick up the balance. There may be some scenarios where it will not pay the entire balance, but it will definitely pay a large portion of it leaving you with a much smaller obligation.
Gap insurance can be provided through your lender or your insurance agent. Policies purchased through your lender may be a little higher in price than what the insurance agent offers, but typically will pay a higher percentage of your loan to value over advance. In many cases the policy purchased through your lender will pay your deductible up to 1000.00 as well, which means you may not incur any out-of-pocket expenses.
Gap insurance is designed to protect the consumer. Shop around for the best rates and the most coverage to be sure you are protected when tragedy strikes.