gap insurance

GAP Insurance: Why It's Essential for Your Vehicle

Guaranteed Asset Protection (GAP) insurance is a vital coverage option for vehicle owners, especially those who have financed or leased a vehicle. GAP insurance provides financial protection in the event of a total loss, such as theft, accident, or severe damage. Without it, you could find yourself owing more on your loan than your vehicle's current value, leaving you with a financial gap to cover.

When you purchase a new or a used vehicle, its value begins to depreciate as soon as you drive it off the lot, some suggestions are up to 25% of the value as soon as it’s registered.

In the event of a total loss, your standard motor insurance policy will typically only cover the market value of your vehicle at the time of the accident. This pay-out doesn’t take finance interest or other charges into account so  it is unlikely to be enough to cover the balance of your loan or lease, leaving you responsible for the remaining difference.

GAP insurance steps in to cover this difference, ensuring you don't have to pay out of pocket for the loss you are going to face.

GAP insurance is usually an affordable option that provides valuable protection on an annual basis or a fixed term to match the term of your finance arrangements. It can save you from unexpected financial burdens, especially in the first few years when depreciation is at its peak.

How Does GAP Insurance Work?

If your vehicle is deemed a total loss by your insurers they will only pay their assessment of the current market value of your vehicle, not how much it cost you or how valuable it is to you. However, if the market value is less than what you owe on your loan or lease, GAP insurance covers the difference, so you aren’t left paying for the remaining balance.

Benefits of GAP Insurance

1. Financial Protection: GAP insurance helps prevent you from owing money after your car is deemed a total loss.
2. Affordable Coverage: It is typically inexpensive and provides significant value for the protection it offers.
3. Peace of Mind: You can drive knowing you have coverage in case of a total loss.

For those financing or leasing a vehicle, GAP insurance offers essential protection, ensuring that you're not left with unexpected expenses after an accident.

If you want to discuss your circumstances and what policy options might be most appropriate for you, give our friendly team a call.