Guaranteed Asset Protection, or GAP insurance, is available for those who lease or purchase new cars. In the unfortunate event that you find your vehicle stolen, damaged, or in an accident, your full collision and comprehensive insurance coverage may not completely cover the cost. Reason being that the moment your newly purchased automobile is driven off the lot, its value begins depreciating quickly.
In two or three months, your car may be worth a third of when you first purchased it. If you end up in an accident, insurance companies will not cover the full remainder of the payments. The car is not considered new anymore and even though you have been making payments, the insurance company will cover what they believe the automobile is worth after the point of purchase, not the remainder that you owe. This will leave a considerable "gap" in your protection and still leave you susceptible to having financial responsibility in paying back the lender or payments.
For example, the purchase of a new 2005 model automobile will run you 40.000. Within a half a year, the car may be worth 25.000. If the car is totaled, insurance will cover up to the 25.000, leaving you responsible with the payments of the 15,000 that was depreciated from the original value.
Thats quite a large chunk of money to pay, especially for a car that doesn't run or is in service. Fortunately, GAP insurance is fairly cheap. A low cost coverage costing only dollars of the thousands that you will end up paying if you're not fully covered. Call your insurance companies today to see whether Gap insurance is part of your coverage.
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