When you are involved in an automobile collision, it can be frustrating to deal with the property damage claim. If your vehicle can be fixed, it’s pretty straightforward; the insurance carrier will typically work directly with an auto body shop and the process can be smooth. However, if your vehicle is declared a total loss, it can be a frustrating process.
The Value of GAP Insurance
The Value of GAP Insurance If your vehicle is declared a total loss, and the total loss value provided by the insurance carrier is higher than what you owe on your loan, you will not have an issue. You can pay off your loan and use the remainder to put toward a new vehicle. However, if the total loss value provided by the insurance carrier is lower than what you owe on the loan, you will be out of pocket to your lienholder for the difference, unless you purchased GAP (Guaranteed Asset Protection) insurance.
GAP insurance is optional coverage that you can purchase, which will cover the difference between the total loss value and the amount you owe on your loan. In addition to situations where your vehicle is determined a total loss, GAP insurance also comes into play if your vehicle is stolen.
When To Purchase GAP Insurance
The question then becomes: should I purchase GAP insurance? The answer depends on a number of factors including: how much you can afford to pay out of pocket if your vehicle is totaled or stolen and how much money you put down at the purchase of your car, among many other factors. You can purchase GAP insurance through many common insurance carriers or the dealership where you purchased your vehicle. It is important to look at every factor before deciding whether you need GAP insurance.