Understanding the multiple options you have with regard to auto insurance coverage can be a bit daunting, if not outright confusing. What does this coverage actually cover? What does that coverage actually cover?
Sometimes it seems as if there are more options than you really need, but this isn't true in the case of GAP insurance—not if you have a loan on your auto. GAP insurance is a type of coverage that anyone with a loan out on their vehicle should consider having. That's why it's always a good idea to get a GAP insurance quote.
What does GAP insurance cover?
There are some misconceptions out there as to what GAP insurance actually covers, but the truth is that it's designed for one purpose.
This type of coverage will pay you the difference between what you still owe on your car loan, and what your insurance company determines the value of your car to be if it becomes a total loss. That's what GAP insurance does.
Let's say your car is involved in an accident and it's declared a total loss. Your insurance provider determines that the actual cash value (ACV) of your car is $9,100.00. You still owe $11,000.00 on the loan, however. As its name implies, GAP insurance pays you're the difference between the two figures; in this scenario, $1,900.00.
What is not covered by GAP insurance?
Things not covered under GAP insurance are:
• A rental car while you wait for your car to be repaired
• It will not make a loan payment if you are unable to
• It doesn't cover the remaining value of your car if it's repossessed
• It won't cover any extended warranties you have on your car
• It won't cover any roll-over amounts you have rolled into the original car loan
• If your car is stolen with the keys left in it
• Damage resulting if you were driving drunk
These are some of the the things GAP insurance doesn't cover.
The in's and out's
If you take all of the above into consideration you can see why in some cases, this coverage is good, and in others it may not be.
For instance, it you still have a substantial amount to pay on your car loan you might want to get GAP insurance. On the other hand, if it's almost paid off, you might want to drop it.
The best thing to do is read up on what GAP insurance will and won't cover. This way you know whether to ask about it when you're calling to get your GAP insurance quote.
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