When Gap Insurance is a Good Idea
First of all what is Gap Insurance? Gap Insurance stands for Guaranteed Auto Protection and is an optional auto insurance coverage. This coverage helps pay off your loan if your car is totaled and you owe more than the value of the car. Totaled cars are typically paid out at Actual Cash Value (ACV). Actual Cash Value is replacement cost minus depreciation. As you know your new car loses value as soon as you drive it off the lot. In the first year a car usually depreciated 20 percent.
You get in an accident and your car is totaled. If you own your car, the check for your totaled car will be sent to you. If you lease the car, the check is sent to the leasing company. So what if the amount of your loan is more than the check to the leasing company? You still need to pay the fiance company for the balance. Paying for a totaled car is not what you want to be doing! The solution is to buy Gap Insurance. Gap Insurance pays the difference between the amount of your loan and the ACV of your car.
Gap Insurance is a smart addition to your auto policy if:
- Your car is new
- You leased your vehicle
- Financed for 60 months or longer
- You put less than 20% down on the lease
Keep in mind that you will still need to pay your deductible if your car is totaled and you have Gap Insurance. If you have any questions about Gap Insurance please call us! www.mancuso-nowak.com