Car owners often assume that if their car is totaled, it will be replaced at the amount they paid, or at least the amount they owe. However, that’s not always the case — learn why and what you can do to protect yourself.
What is Gap Coverage?
Guaranteed asset protection, or gap insurance is an optional automobile coverage that helps you transfer the financial risk if you are involved in an auto accident and you owe more for your vehicle than the amount that it’s worth. This is referred to as being “upside-down.”
Since a new car’s value drops significantly the minute it’s driven off the lot, if you are involved in an accident that totals your vehicle in the first few years you own your vehicle, you may find yourself owing the finance company more than the vehicle’s actual value. Gap insurance provides for the “gap” between the two amounts.
Is Gap Insurance Right for Me?
New vehicle financing options: If you took advantage of a zero percent down payment deal or put a small amount of money down, or stretched the life of your loan past 3 years, gap insurance is most likely a good idea. That’s because the vehicle typically depreciates considerably faster than you have paid down the value on your vehicle’s loan.
Used vehicles: Gap insurance is typically not available for used vehicles. To cover your risk, it’s wise to put down an ample down payment and finance the vehicle for the shortest possible time-frame.
Leased vehicles: For those who lease a vehicle, gap insurance is considered an essential coverage because typically there is no trade-in and little cash put down to lease the vehicle. Similar to purchasing a vehicle, if the car is a total loss, you will owe the difference between what you have paid and what you owe on the balance of the lease.
Cost versus benefit: Gap insurance is offered for a nominal fee, which makes it a great value for anyone who finances or leases a new car.
Our Agents Are Here to Help
Depending on your vehicle’s make, model and loan terms, our agents can help you determine if gap insurance is the right choice for you. If you’re purchasing a new vehicle, contact Eaton & Berube Insurance Agency, LLC at 603-882-2766 to discuss including gap coverage in your auto insurance policy and keep you from getting caught upside-down!
Disclaimer: This brochure is provided for informational purposes only. The information provided herein is not intended to be exhaustive, nor should it be construed as advice regarding coverage. Eligibility for coverage is not guaranteed and limited to the terms and conditions contained in the applicable policy. © 2008, 2013, 2016 Zywave, Inc.