When you’re driving a car, you legally need to have automotive insurance — but do you have the right type? There are different insurance options to choose from, one of which is GAP insurance. This guide takes a look at GAP insurance, defines it and explains why you should consider getting it when you purchase your new Honda.
GAP insurance stands for Guaranteed Asset Protection insurance. It is an option that will cover the difference between the amount you owe on your vehicle and its actual cash value should your car be totaled, destroyed, or stolen. This type of insurance will give you peace of mind knowing that you won’t lose money if something happens to your car.
Your automotive lender will usually require you to have collision and comprehensive insurance coverage on your new vehicle until you pay it off. These types of insurance will help pay for your car if it’s stolen or totaled, but they only cover its depreciation value. GAP insurance is there to cover you if you owe more on your loan or lease than what your vehicle’s depreciated value is.
GAP coverage will vary depending on your insurer, but regardless of your GAP policy, it will make sure that you don’t have to pay out of pocket if your vehicle is totaled, destroyed, or stolen. For instance, if you purchased a new car for $25,000 and have paid off $5,000, you have $20,000 left on your loan. At this point, your car is totaled in a collision.
If you have collision coverage on your automotive loan, your lender will pay up to the car’s depreciation value – let’s say this value is $18,000. If you don’t have GAP insurance, you will have to pay the difference between the $20,000 you have left on your loan and the car’s $18,000 value, leaving you with a $2,000 bill for something that may not have been your fault. With GAP insurance, the insurer will help cover that difference so you don’t have to pay for it yourself.
To learn more about GAP insurance and if it’s right for you, give the financial experts at Honda of Tiffany Springs a call today.