Understanding GAP Insurance

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Considering just how many different types of auto insurance there are to consider, you’d be forgiven for missing guaranteed asset protection — or GAP — insurance.

This can come in handy if you get into an accident or have your car stolen. If you owe more than what your vehicle is worth when an incident occurs, this optional coverage can help pay off the remainder of your car loan.

At Quirk Chevrolet Of Bangor, we pride ourselves on securing you the very best rates on GAP insurance. Speak with one of our financial experts today to learn more.

Why You Need GAP Insurance

Many lenders require you to have collision or comprehensive coverage when you lease or purchase a new vehicle, at least until you pay off the loan. If you’re involved in a crash or have your car stolen, those policies would only cover your car’s current market value. GAP insurance helps cover the difference between what the collision or comprehensive plans pay for and what you owe on your car loan—covering the gap, as it were.

How it Works

Say you owe $10,000 on your loan. If the car’s depreciated value is $6,000 when it is totaled in an accident, then your collision coverage would pay the $6,000. With GAP insurance, the policy will pay for the remaining $4,000. If you opt out of the plan, you’ll be personally responsible for paying that sum.

When to get GAP Insurance

Though GAP insurance is optional, it can be more than worth it depending on your situation. If you purchase a brand-new vehicle, it will depreciate rapidly once it leaves the lot, increasing the likelihood that you’ll find yourself upside down on your loan. Additionally, if you chose to make a small — or nonexistent — down payment on the loan, GAP insurance is a wise investment.