GAP Insurance - What is It: Automotive Insurance Online and Car Insurance FAQ Informations

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GAP Insurance - What is It?

GAP insurance is a term that is often thrown around by insurance brokers and agents, but few clients really understand what it means. In short GAP insurance stands for guaranteed auto protection. GAP insurance helps cover the difference between the value of a car and the amount owed on a car loan if an accident in which the car is totaled happens to occur.

Many people assume GAP insurance is a scam used to procure more money from the insurance company but it does provide valuable protection for new car owners. When a person buys a new car the value of that car drops sharply shortly after it leaves the dealership floor. Once a new car is out the dealer doors it is officially considered used; whether it has 1 or 1000 miles on it the value of the car can dip up to 30%. For example if you happen to buy a car that is worth $35,000 when purchased from the dealer that car may only be worth $25,000 one week or month later. A car that is bought for $50,000 may only be worth $40,000 when it leaves the dealership, and so on and so forth.

If a car loan is taken on a $35,000 car with very little money down the value of the car after it leaves the showroom will be significantly less than what is owed on the car. If the worse should happen and the car is totaled while the loan is still higher than the value of the car GAP insurance can be used to cover the difference so a person is not stuck with paying a car loan for a car that has been totaled out by an insurance company. The difference between the actual market value of the car and the loan amount are used to calculate the necessary GAP policy.

GAP insurance is a premium service and is normally not included in a standard insurance policy, even if the policy has full coverage including collision, fire and theft. GAP insurance can be added to most existing or new insurance policies when they car is added. Not all companies have GAP insurance even as a premium option so it is best to look around for a company that offers the coverage. It can also be purchased from the dealership where the car is being bought or through an online GAP insurance provider.

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GAP Insurance - What is It?
GAP Insurance - What is It?

Category Car Insurance FAQ Informations


Car Insurance FAQ Informations-43
Car Insurance FAQ Informations

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