Having Guaranteed Asset Protection (GAP), coverage is like having a net underneath you when you walk a tightrope. Even the most skilled acrobat can make the occasional mistake and accidentally tumble through the air . . . but a safety net can save the day. Likewise, even the most cautious driver in the world can get into an accident that has the potential of causing financial hardship under certain circumstances. GAP coverage can be a safety net.
But, before you buy GAP coverage, let's take a closer look at what it typically covers so you can determine if it's right for you.
GAP typically covers the difference between what your car is worth and what you still owe on it, in the event that your car is declared a total loss due to an accident or via theft. You can get an idea of what your vehicle is worth by visiting one of the following valuation guides: Kelley Blue Book website or NADA Black Book. GAP coverage may be a good idea if you're upside-down in debt with your car, meaning that the balance of what you still owe to your lender is higher than what you could actually get if you were to sell your car. You may be able to purchase GAP coverage at the dealership when you purchase or lease your vehicle.
There are quite a few reasons why someone might want to have GAP coverage. Chief among them is being upside-down in debt with your car, but this doesn't necessarily have to be the case for you to be able to make good use of GAP coverage. The minute you buy a car and drive it off the lot, it decreases in value. What happens if your car is totaled before you've even had a chance to make a first payment? Having GAP coverage could help save you from having to pay a hefty bill.
There are a lot of misconceptions about what GAP coverage does and doesn't cover. Remember, the only thing that GAP covers is the difference between what you owe and what your car is worth. It does not cover any of the following:
- Payment continuation if you lose your job or suffer a disability.
- Reimbursement for necessary repairs to your car if it's damaged in an accident.
- Rental car service if you're left without the use of your car due to damage or an accident.
- The difference between what your car was worth pre-accident and what it's worth after it's been repaired. In a lot of cases, that difference can be substantial, but GAP insurance doesn't cover this.
If you're considering purchasing GAP coverage, you may want to consider inquiring about it at the dealership where you purchase your vehicle.