What Exactly does GAP Insurance Cover on a Vehicle?
GAP (Guaranteed Asset Protection) insurance is an optional, add-on car insurance coverage that can help certain drivers cover the “gap” between the amount they owe on their car and the car’s actual cash value (ACV) in the event of an accident. Gap insurance works similarly whether you lease or finance your car. So, the market value of your leased car is going to be much lower than what is still owed on your lease contract.
Example on How GAP Insurance Works:
Imagine you’ve been involved in an accident and your car has been damaged beyond repair and must be replaced. You still owe $25,000 on your car loan but the vehicle is now worth only $19,000. With gap insurance, you can cover the $6,000 difference between what you owe on your car and what it’s worth, after the deductible. Some policies also cover the deductible. Know more about - List of countries contributing to the success of usage-based insurance.
GAP Insurance Covers the Following:
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Here’s what GAP insurance does not cover :
If you’re having trouble making your car payments due to financial hardship, disability, loss of a job, etc.
Paying for a rental car while your vehicle is in the shop
Extended warranties added to your car loan
Car rental while your car is in the shop
A down payment for a new car
Any repairs to your vehicle
The carry-over balance on a loan you may have rolled over into your new car loan
Reduced value of your car after an accident
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GAP insurance is a good choice in any of these circumstances:
If you made less than a 20 percent down payment on your vehicle
If your auto loan is 60 months or longer
If you're leasing a vehicle. If you're leasing a new vehicle
If your loan has a high-interest rate because the principal on the vehicle will take longer to pay down versus the depreciation
You do not have significant cash savings to cover the difference between the amount you owe on your loan and the actual cash value if your car is stolen or totaled.
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Contact our Insurance Telematics Specialist today to know more about how Traxroot's Pay As You Drive (PAYD) Insurance programs can assist your company. We can help you set up a ready to market UBI program in less than 24 hours.