What is GAP insurance?
Surely many people have heard of car insurance. However, not everyone probably knows what does GAP insurance mean. GAP is an abbreviation that decodes as “Guaranteed asset protection”. Every year, the percentage of the car’s purchase price can be received as the sum insured decreases. Over time, the market value of the car decreases as well, so it’s fair enough. However, with GAP, depreciation is considered 0% even after several years of use.
So, thanks to GAP insurance, a person can receive compensation for the difference between the market price of the car, taking into account depreciation, and its immediate value at the time of insurance. Of course, this type of insurance is one of the latest innovations in auto insurance, it makes our life a bit easier. Actually, it’s a voluntary type of insurance.
Why you should buy this type of insurance?
When your car is completely lost – that is when the damage is so extensive that it is not worth repairing – GAP insurance comes into play. Gap coverage varies from insurer to insurer. For instance, if your loan debt is much higher than the value of your car, you should check with your insurance company to make sure that your gap coverage does indeed cover the gap in that particular situation.
If your debt is more than the value of the car, your insurance payment will go directly to the bank or financial institution servicing your loan, because until you pay it off technically the car will be in the possession of the lender. On top of that, you also owe your lender the difference between the insurance payout and the amount left on your loan. In other words, you will no longer have the car, and you will still owe money on it. This can make things very difficult and, also, it will be hard to get a new car. That’s why such insurance is a good idea if you have a car loan. If you don’t understand how auto insurance works and assume that you will be insured if your car is maxed out, you may end up covering the gap yourself. GAP insurance is not designed to be used as a stand-alone policy.
Registration of GAP insurance:
GAP insurance can be arranged not only for a new car but also for a used car (although with restrictions – as a rule, the car should be under 5 years old and with a mileage of no more than 100,000 km).
How much does it cost?
Every insurer independently determines the price of GAP insurance, but on average such policy costs 1% to 2% of the vehicle’s insurance value. The statistics of thefts and anti-theft systems will also have an impact on the final rate. In addition, some companies take into consideration the losses due to the constructive destruction of the car.
The policy will cost the most if the car is among the most frequently stolen ones and is not equipped with an anti-theft device. In most cases, the insurance rate is not affected by the driver’s driving record or age, though some companies do take this factor into consideration.
Decreasing the limit of the insurer’s liability will also help reduce the cost of insurance. However, this method conflicts with the main purpose of this type of insurance, that is why it is worth resorting to it only as a last resort. In addition, it is not suitable for insuring mortgaged vehicles.
Where can you get it?
To get such insurance, you can go to your insurance company and ask them to arrange this insurance for you. This is the easiest and most common way. If you buy a car, the car dealership where you buy the car will probably offer to take out such insurance, but it will probably cost more than any insurer. In any case, you should compare prices online and find the best deal.