What Is Automobile GAP Insurance

Reader’s Question:

What is automobile GAP insurance?

David

Detroit MI

Automobile GAP insurance can protect your car during the early years of your its life if you have a loan or a lease.

In case of an accident or loss, automobile GAP insurance will pay the difference between the market value of the car and the current amount you still owe on your lease. Gap Insurance provide protection on your car lease or loan. Usually it also pay car insurance deductible.

If your car has been totaled due to accident, theft, fire, flood, tornado, vandalism, or hurricanes your insurer will typically pays the market value of the car. It may be less than its actual retail value. Usually it is considerably less than the outstanding balance on your loan or the amount due for a lease payoff.

Should I Buy A Gap Car Insurance Policy?

Reader’s Question:

Is it advisable to acquire gap Insurance for my car insurance policy here in Milwaukee, Wisconsin, before a take out a car equity loan?

Tyler

Milwaukee, WI

Although it is not necessarily required, some lenders will actually require you to get and carry a gap insurance policy on your auto insurance before agree on financing your car. The reason is that with a gap policy in place, your lenders are assured that in the event your car gets totaled in a car accident, gets lost or stolen, or otherwise incur damage beyond repair, considered as “Total Loss”, gap insurance will provide the necessary safety net should your regular car insurance fails to sufficiently cover for the loss or damage of the vehicle (and to pay for any outstanding balances on your car loan or lease).

You need to be aware of your vehicles Actual Cash Value or ACV (the value being preferably quoted by a third party, not your insurance provider) since this will determine how big of a gap insurance coverage is necessary. This type of coverage is not really expensive since it the usual gap amount being insured is note very big. It is not advisable to keep this type of car insurance for a long period of time, especially after the maturity of your loan, or when the remaining loan balance is less than the car’s ACV. The amount of gap insurance needed will also vary depending on car type, car age and on your lenders policy as well.