What Is GAP Insurance?

When you buy or lease a new car or truck, your vehicle starts to depreciate in value the moment you drive it off the lot. Statistically, most cars lose approximately 20 percent of their value within the first year. Standard auto insurance policies cover the depreciated value of a car (actual cash value) — in other words, a standard policy pays the current market value of the vehicle at the time of a claim.

Typically, when you finance the purchase of a new car you put down only a small deposit. In the early years of the vehicle's ownership, the balance of the loan may far exceed the market value of the vehicle itself.

In the event of an accident in which you've badly damaged or totaled your car, GAP insurance covers the difference between what a vehicle is currently worth (and what your insurance carrier will pay) and the amount you actually owe on it.

As such, GAP insurance pays the potential difference between a total loss settlement from your insurance carrier and the remaining balance of your loan/lease. Unless you have made a large down payment on your vehicle almost everyone who has a loan or lease on their vehicle could benefit from GAP insurance.

Your auto dealer may offer to sell you GAP insurance on your new vehicle. However, most auto insurance carriers also offer it and they typically charge far less than the dealer. On a typical auto insurance policy including gap insurance with collision and comprehensive coverage adds only about $25-$50 a year to the annual premium.  

We would love to answer any questions that you might have. Contact Kovalev Insurance today and request a complimentary consultation to ensure your property is properly protected.