These days, having insurance is essential. Of course, you must know what to do if the insurance company drags its feet, how to contract it, and how much it costs, among other aspects. For example, if you want to insure a cleaning company, the price will be different from insuring a contractor. And if we are talking about insuring a car, even more different.
Want to avoid a headache with your car? GAP insurance is an excellent option. Within the world of vehicle insurance companies, there are several offers that will reimburse you for the actual cost of the car. However, if you are one of those who acquired your car using a lease or loan, GAP insurance will be the best option for you, of course, under certain conditions.
The Guaranteed Asset Protection (GAP) will help you pay the difference between your actual cash value (ACV) at the time of the accident and the debt you owe on the loan or lease. Remember that most vehicles devalue, some faster than others, so this type of coverage is an essential service for you.
When should I get GAP insurance?
Not everyone needs GAP insurance. In fact, this is essential insurance for those who acquire a vehicle through financing; but you should consider that certain conditions apply to acquire it, and knowing them will help you make a worthwhile investment in case of a total loss due to accident or theft. Therefore, you must know the scenarios in which you can contract it:
- The financing of your vehicle will be for 60 or more months
- You have paid less than 20% of the total amount
- The model you purchased depreciates quickly compared to others
In case the loan or lease debt is less than the actual value of your car at the time of the accident or the difference between both amounts is small, it is not necessary to use the GAP.
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How do I know if I have GAP insurance?
This is a very frequent question among those who buy a car or truck through a lease or loan since it is optional coverage in some vehicle insurances. If you don’t remember if you purchased it when you got your car, you can check the following documentation:
- Car insurance policy
- Vehicle sale document
- Lease agreement
- Loan agreement
If this paperwork does not mention GAP insurance in any of their lines, it is most likely that you do not have this insurance. However, in this case, you can call your insurer or dealer to reconfirm that you did not acquire it at the time of purchasing your vehicle.
You don’t have to worry, you can get this type of insurance even if you have had your car for a few months; although both insurance companies and dealers will recommend you get it when you take it out of the dealership or when you get your car insurance since it is the ideal thing to do.
Can I get GAP insurance after an accident?
This is another frequently asked question. Yes, you can insure your vehicle after an accident, but it does not apply to any claim. If the losses or damages are minor and you do not have GAP insurance, you just need to call your insurance company and request this coverage.
Keep in mind that this insurance will not cover minor damages to your car or injuries you have suffered in the accident.
On the other hand, if the loss is total, you will not be able to acquire this type of insurance and you will have to pay the difference between what is covered by the insurance of your vehicle and the debt of the loan or lease.
This insurance has a very specific function, so it is also important for you to know that you can purchase GAP insurance months or up to three years after you have purchased your car.
GAP Insurance after Accident
byu/HelpThrowaway1542 inpersonalfinance
However, in these cases, you should know the terms of the insurance companies, since if the car or truck has been driven for more than three years, you will not be able to contract this insurance.
This is why the most advisable option is to obtain it as soon as you buy the vehicle. In addition, the longer you wait, the lower the coverage will be.
Can I purchase GAP insurance at a dealership?
Of course, you can! And it’s most likely that a dealer will offer you this type of insurance if you purchased your car with a loan or lease. However, usually, the amount to be paid will be higher compared to the prices offered by insurance companies, so your best option in terms of costs will be the latter.
You can also acquire it in banks or credit unions, so if you think you need this insurance according to the information we gave you, call at once to your trusted financial or insurance service! Remember that your vehicle keeps depreciating.
I bought my car with a lease and the paperwork mentions “GAP waiver addendum”, is it the same as GAP insurance?
Although some use them as synonyms and cover the same situation, both have slight differences. As you can see, some lease agreements include a GAP waiver addendum clause, so you do not need to purchase GAP insurance or make an extra monthly payment. You can also get it in some loan agreements.
In the case of GAP insurance, this is a service that you will have to hire separately, and that, consequently, will represent an investment that you must cover monthly together with the insurance that covers your car.
Another point to consider is that a GAP waiver may only cover a percentage, which will vary depending on the lender when GAP insurance pays the entire difference.
Will GAP insurance cover negative equity?
Better known as “being upside-down on your car loan,” GAP insurance does cover the amount of your debt in the event you purchase a new vehicle.
Therefore, the amount you owe on the old car will be added to the new one. This will mean that you will have to make higher monthly payments, which equals higher interest on the loan.
If it is a used car, it should be relatively new and without many miles on it. Remember that if it is more than three years old, you will not be able to insure it with the GAP, so the best thing to do is to get informed before making the purchase.
References
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“How Do I Know If I Have Gap Insurance? Find Out Today.” Marble | Earn Rewards on Your Home and Auto Insurance, https://www.marblepay.com/blog/how-do-i-know-if-i-have-gap-insurance
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Metz, Jason. “Gap Insurance: What It Is And How It Works – Forbes Advisor.” Forbes Advisor, https://www.forbes.com/advisor/car-insurance/gap-insurance/
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Rivelli, Elizabeth. “Can You Get Gap Insurance at Any Time? | Insurance.Com.” Insurance.Com, https://www.insurance.com/auto-insurance/can-you-get-gap-insurance-at-any-time#:~:text=If%20you%20get%20into%20a,balance%20out-of-pocket
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“What Is Gap Insurance?” Progressive, https://www.progressive.com/answers/gap-insurance/#:~:text=You%20have%20a%20loan%20rollover,you%20against%20the%20negative%20equity
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“What Is Gap Insurance? | III.” III | We Are The Trusted Source of Unique, Data-Driven Insights on Insurance to Inform and Empower Consumers., https://www.iii.org/article/what-gap-insurance
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“What’s the Difference Between a GAP Waiver vs. GAP Insurance? | RefiJet.” Auto Refinancing with RefiJet. Get a Better Car Loan Today! | RefiJet, https://www.refijet.com/whats-the-difference-between-a-gap-waiver-vs-gap-insurance/