What Is GAP Protection?
About GAP Protection
When you purchase a new vehicle or even a relatively new pre-owned model, it’s possible that you may end up owing more on the car than it’s actually worth after some time passes. This can be a result of depreciation and other factors that lowers the value of your vehicle, creating a gap between the amount you still owe on your car loan and the actual value of your vehicle.
In the unfortunate event that your vehicle is damaged beyond repair or stolen and not recovered, you could be responsible for coming up with the difference yourself. Standard auto insurance policies often will only cover the current market value of the vehicle at the time of a claim, leaving you with at risk for owing additional money.
That’s where Guaranteed Auto Protection (GAP) insurance comes in handy. When you need assistance getting the extra coverage you haven’t received from your insurance company, GAP provides an excellent solution. Germain Cars has assembled this helpful list of benefits which highlight how GAP coverage can make sense for your situation.
GAP Protection Example
In the chart provided above, you’ll see three different colored areas. The red line represents a $25,000 vehicle loan balance on a vehicle. In blue, this section corresponds to the actual value of the vehicle across the entire loan term. For this scenario, the red (vehicle loan balance) and blue (value of the vehicle) sections are not equal until the loan term has reached its end. The yellow section represents what GAP Protection offers in terms of coverage.
Without GAP, you could find yourself in a situation where your vehicle loan balance is higher than the value of the vehicle. For example if your car is totaled as a result of an accident in year 1, you would receive $15,000 for the value at that time. Your loan balance is $20,000, leaving you responsible for the $5,000 difference without GAP Protection.
Benefits of GAP Protection
- Benefits paid up to $50,000 with deductible coverage up to $1000
- Protection is provided for the term of your loan/lease
- All risk protection
- Protection for up to 84 months
- Protection is applicable for vehicles valued up to $75,000.00 at time of purchase
When To Consider GAP Protection
- Purchasing a New Vehicle
- Purchasing a Lightly Used Vehicle
- Purchasing an Expensive Vehicle
- Financing a Large Amount
- Financing for 60 Months or Longer