Automobile GAP Insurance
Automobile gap insurance covers the difference between the value of the vehicle and the amount of an outstanding loan. Hence, the “gap” between the two values. the policy’s industry name is Guaranteed Asset Protection (GAP). If a buyer has a down payment of less than 20% or folds an existing car loan into a new one they could potentially be at risk.
In the event of a total loss accident, the insurance company will pay an amount for the vehicle which may be less than the amount of the outstanding loan. You could actually have to continue to pay a loan for a vehicle you no longer own. Gap insurance helps to indemnify you in such situations.
Gap insurance prices vary depending on the state you purchase or live in, but generally, range about $10 per month during the life of your loan. This product is regulated by the federal government as well as some state governments. In some cases, loans are ineligible for GAP coverage, for example; there is no need for the product if you enter into a loan in an equity position by putting a significant down payment or trade in for a vehicle that is paid in full. Also, current military personnel are often unable to have GAP insurance due to a military lending regulations.
Some lenders may require gap insurance if you are likely to be upside down on your loan which means that your car is not worth as much as the loan balance. Some lease agreements also require gap coverage but most lease agreements have a gap coverage included to protect the financial institution as well as you.
Our Finance team can provide gap coverage details and help you to determine if this coverage is advisable.