Gap coverage is a type of additional car insurance that helps a vehicle owner pay off their auto loan if the vehicle is totaled or stolen, and the outstanding loan balance is more than the depreciated value. This type of policy can be crucial to protecting your investment and preventing financial hardship if the car is damaged beyond repair or stolen. Below, learn more about gap insurance and why you should consider it when purchasing a new vehicle.

What Is Gap Insurance?

Gap is an acronym that stands for Guaranteed Asset Protection. If you are in an accident and your insurer declares the vehicle a total loss, or if a car is stolen, gap insurance pays the remaining difference between the value of the vehicle and the balance still owed on the loan. For instance, you own a new vehicle that you are financing, and the outstanding balance on the loan is $15,000. Then, you're in a car accident, and your car insurance provider declares the vehicle totaled. The collision insurance you carry will pay up to the car's depreciated value of $13,000. You are responsible for the $2,000 difference, and this is the amount that gap insurance would help pay for. Bear in mind that you can only qualify for gap coverage if you are the original borrower or leaseholder on a new car.

Why Is It Important?

The moment you drive a new vehicle off the car lot, it depreciates in value. Gap insurance takes this fact into account, making sure that you aren't left on the hook for exorbitant costs in the event of a mishap when owing more than the vehicle's worth. Gap insurance is not a standalone policy. It is used as an overall protection plan alongside your comprehensive or collision insurance.

When Should I Get Gap Insurance?

Anyone purchasing a new vehicle with a down payment that is less than 20% of the asking price should have gap insurance. It is also an excellent precautionary measure to take if your car loan will exceed 60 months. If you are leasing a vehicle, gap insurance is often a requirement before driving off the lot. Also, some vehicles depreciate faster than most, so their owners should be protected; among the fastest depreciating vehicles are the BMW 5 Series, the Volkswagen Passat, and the Mercedes-Benz E Class.

When you're ready to purchase gap coverage, the team at Jenkins & Bevan Insurance is here to help. Since 1954, they have been serving clients throughout the Lorain County, OH, region. In addition to gap policies and car insurance, they offer home and business coverage, as well as life insurance. To request a quote, call (440) 984-6771 today or visit their website.