Gap insurance protects drivers in case they get into an accident soon after they purchase a car. Cars lose quite a bit of their value as soon as they’re driven off the lot. As a result, the market value of one’s car can be less than what a driver owes on it. Since auto insurance companies pay based on market value, drivers might be surprised to learn they have to pay out of pocket. Gap insurance addresses this problem.
Gap insurance is technically an acronym; it stands for Guaranteed Auto Protection, but colloquially it refers to the difference between the market value of one’s car and the amount owed on a lease or loan. If a driver gets into an accident soon after buying a new car, the insurance company will usually only pay out the cash value of the car. Given that on average, new cars lose 30% of their value in the first three months of ownership, the cash value can be significantly less than the amount still owed. Drivers are responsible for the difference between the two, which can sometimes amount to thousands of dollars. Gap insurance is a way to prevent this; it covers the difference. Sometimes it even pays for one’s insurance deductible, as well.
Drivers can buy gap insurance with their normal car insurance policy; many companies offer it as an additional option. If they don’t, one can buy a gap insurance policy a la carte. There may be limitations to the gap coverage – like a maximum car value or loan amount – so drivers need to pay attention to details. But drivers need to shop around for the best coverage. Comparing multiple quotes from different car companies is a must! AiQuotes makes buying cheap gap insurance an easy process. Enter your zip code in the form above to get started.
