How gap insurance works – When you buy or lease a new automobile or truck, depreciation begins the moment you drive it off the lot. In reality, the average automobile loses 20% of its value within a year. Standard auto insurance plans cover the depreciated worth of a vehicle; that is, a standard policy covers the vehicle’s current market value at the time of a claim.
What is the GAP and how does it function?
Key takeaways: – Gap insurance pays compensation when the amount remaining on a car loan or lease is larger than the vehicle’s worth at the time of a complete loss declaration. Gap coverage is only worthwhile if you are leasing a vehicle or if you owe more than the automobile is worth.
Is it advantageous to have a car with gaps?
Do You Need Gap Insurance Coverage? – If you do not have a loan on your vehicle, there is no reason to get gap coverage. Gap coverage may be a smart idea if you finance your vehicle, depending on how much you drive and how rapidly your automobile depreciates.
GAP Insurance 101
A GAP insurance policy, which typically lasts for three years, is meant to avoid this issue by covering the gap between the amount you get from your auto insurance provider and the cost to replace your vehicle.