What is GAP Insurance? Pembroke Pines FL

GAP Insurance or “guaranteed auto protection” is a form of auto insurance that covers the difference between your vehicle’s actual cash value (ACV) and the amount that is still owed on it. Actual cash value is an amount equal to the replacement cost of the stolen or damaged vehicle at the time of loss, less depreciation. The condition of the vehicle may be considered as well when determining the ACV or “market value.”

GAP insurance typically costs several hundred dollars, and most vehicle owners make a one-time payment for the policy. This type of insurance is useful during the first several years of vehicle ownership or during a lease period. According to Joanne Helperin, Senior Editor at Edmunds.com, your car depreciates around 20 percent the second you drive it off the lot. It will continue to depreciate at a significantly fast rate during the first 24-36 months of ownership. If you are involved in a serious accident and your car is totaled during this time or you are the victim of auto theft, your auto insurance company will pay for the ACV of the car.

GAP insurance could save you thousands of dollars by covering the difference between what you owe on the car and the actual cash value of the car. For instance, say you paid $19,595 for a new Toyota Camry and after one full year of ownership, the car gets totaled. You still owe the finance company $16,595. You contact your auto insurance company and they inform you that the actual cash value of your new Camry is now only $13,595, the amount the auto insurance company will pay. This means, your debt to the finance company is still $3,000. If you do not have GAP car insurance, this is the amount you will be out, not to mention, you are already out of a car. It is important to keep in mind that GAP insurance is already included in most lease agreements, but double check the lease agreement to be sure.

If your lease agreement or auto insurance policy does not include GAP coverage (some policies do), you should purchase GAP auto insurance as soon as you purchase your vehicle. Most auto insurance companies, car dealerships, and finance companies recommend purchasing as soon as possible, however, you may purchase GAP insurance up to 12 months after you purchase your vehicle. In some cases, the cut-off is around 15,000 miles.

GAP insurance is available for certain types of cars. These include used vehicles up to eight years old, certified pre-owned vehicles, new vehicles, and refinanced vehicles. GAP insurance is not available on most cars over eight years old and commercial vehicles. To purchase GAP auto insurance, talk you your auto insurance agent. Better yet, talk to several auto insurance agents to shop and compare. Much like standard auto insurance policies, rates may be negotiable.

For more information about GAP insurance and official listings for companies authorized to offer GAP insurance coverage in your state, visit the National Association of Insurance Commissioners (NAIC) & The Center for Insurance Policy and Research at www.naic.org.

For more information about auto insurance and auto insurance laws in your state, visit Auto Insurance Tips or your state insurance department for details.