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The Importance Of GAP Inurance

What is GAP insurance?

GAP stands for Guaranteed Auto Protection. It will pay the difference left over after an accident that your regular policy does not cover. If you have a vehicle that is worth less thn you owe on it your policy will only pay for the value of the car. That means the Depreciated Value of the car. You are responsible for the remainder. GAP insurance will pay the remainder and usually the deductible for you.

How GAP Insurance Works

Lets say you purchase a car for around $30,000. After one year you car depreciates and its value is now only $24,000. You still owe $28,000 on your loan. That leaves a gap of $4,000 that you would be responsible for. GAP insurance will pay that $4,000 and will also pay your deductible. You would owe nothing.

Who Should Get GAP Insurance

If you purchased a vehicle and could not afford a big down payment, you may want to consider getting GAP insurance. A car starts to depreciate the moment you drive it off the car lot. Cars depreciate quickly. If you are not going to be able to pay the difference between the cars value and what you owe, then GAP insurance is something you should consider getting. Most of us cannot afford a big loss.

Why GAP Insurance is Important

Gap insurance is suited for the average car owner who owes a significant amount to the financial institution. With the depreciation of cars being such a rapid process, the gap incurred in a total loss of a vehicle could be huge. If you know you cannot afford to cover that difference then GAP insurance is an important insurance feature to look into. A financial institution may insist on your coverage being full coverage, but they do not include GAP insurance in their demands. Talk to you insurance carrier and learn more about GAP coverage.

 

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