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As purchases go, buying a new car is actually a pretty poor investment. This is because most vehicles have an exorbitant rate of depreciation. In fact, your new car or truck starts losing value as soon as you drive it off the lot!

According to Kelly Blue Book, most vehicles lose approximately 20 percent of their original value after the first year. Additionally, The Black Book, which tracks pricing for used vehicles, shows a consistent depreciation rate ranging between 10 to 17 percent annually since 2012. This means that, at best, your new car or truck will lose about 60 percent of its original value after just five years. And that’s the optimal scenario. Black Book’s April 2018 Fitch Ratings Vehicle Depreciation Report actually predicts depreciation will land on the higher end of the spectrum; car owners can expect their used vehicles aged two to six to lose 17 percent of their value in 2018.

The depreciation of a vehicle is dependent upon a number of important factors, including age, mileage, supply, auction prices, new model incentives, and location. It also varies based on the make and model. The end result, however, is always a steady loss of value over time.

Depreciation poses a significant problem for car buyers who can’t pay the full price of a vehicle up front. While the car or truck begins losing value immediately, the financed loan amount remains the same. If something happens to the vehicle after its purchase, the payout is likely to be considerably below the amount still owed on the loan. This frequently results in the loss of the car, no means to acquire a new one, and a large bill that still needs to be paid.

What is Gap Insurance?

The best way to protect yourself against this type of situation is by purchasing gap (guaranteed auto protection) insurance. Gap insurance, which is sometimes referred to as loan or lease gap coverage, is an optional insurance coverage designed to help drivers pay off their auto loan. Specifically, it’s meant to pay for the “gap” between your remaining loan amount and the actual cash value (ACV) of your vehicle after depreciation.

You can often purchase gap insurance when buying a new vehicle from a dealership. While this may be a convenient option, it usually isn’t the cheapest. Most auto insurance companies offer gap insurance as an add-on or include it in discounted coverage plans. It’s not uncommon to find insurance policies that include collision coverage, comprehensive coverage, and gap insurance at a significantly discounted rate.

Not only do many insurance companies offer gap insurance coverage at a lower rate, but they also allow drivers to cancel their policy at any time. This is important, as the gap between your auto loan amount and your vehicle’s ACV will decrease a lot after the sixth year of ownership, making the coverage far less helpful. If you purchase gap insurance from a dealership, however, it’s impossible to discontinue your enrollment in their gap insurance program. Ultimately, you’ll be forced to continue paying for a service that you really no longer need.

How Gap Insurance Works

As an example, imagine that you’ve just purchased a new vehicle that required financing. You drive that car off the lot, happy beyond belief with your purchase, and make your way home. Six months later, you’re driving to the grocery store to pick up a few things and out of nowhere another driver slams into your vehicle. No one involved is injured, but your brand new vehicle is completely out of commission.

1. If You Don’t Have Gap Insurance

The accident is covered and you’re not at fault, but your vehicle is damaged beyond repair. Your insurance company quickly begins working to determine your car or truck’s ACV. They agree to pay $27,000, but you still owe $30,000 on your auto loan. Now, you’re out a vehicle and are still responsible for paying the $3000 difference between the ACV and your auto loan.

2. If You Have Gap Insurance

The accident is covered and you’re not at fault, but your vehicle is damaged beyond repair. Your insurance company quickly begins working to determine your car or truck’s ACV. While they determine that the ACV of your vehicle is $27,000, but your gap insurance policy kicks in. Instead of paying you the ACV, they agree to pay the full $30,000 that’s left of your auto loan. You’re out a vehicle, but it won’t be too difficult to receive financing approval to purchase a new one.

It’s important to remember, however, that some insurance providers still require that the policy deductible is met prior to the gap insurance payout. If the gap between your auto loan and the ACV of your vehicle is $3,000 and your insurance company requires a $500 deductible, then your total gap insurance payout will be $2,500. To avoid any unnecessary confusion, make sure you take time to read through your specific gap insurance policy as it relates to deductibles.

What Gap Insurance Covers

While the concept of gap insurance is relatively simple, the specifics regarding most coverage plans can be a little tricky. Many drivers are often left with questions, the chief among them being, “What exactly does it cover?” Generally speaking, this auto insurance add-on only covers damage to your vehicle that results in a total loss. That means you should be covered for the following:

• Stolen and unrecovered vehicles

• Total vehicle losses

• Negative equity

It’s important to realize that most insurance companies have their own gap insurance guidelines. For example, an insurer’s gap insurance may cover a stolen vehicle, but only after a 30 day waiting period. A different insurance company, on the other hand, may have a shorter or longer waiting period after the claim is filed. For specifics regarding your coverage, you should always research the policy online or contact your insurance provider.

What Gap Insurance Doesn’t Cover

As an add-on policy, gap insurance only covers the loss of your vehicle. That’s why it’s important to have other forms of auto insurance as well. To avoid confusion, here are a number of expenses that are not covered by gap insurance policies:

• Past due loan or lease payments

• Repossessed vehicles

• Property damage

• Bodily injuries resulting from the accident

• Rental cars

• Carry-over balances on previous auto loans

• Extended car loan warranties

• Lease penalties for excess mileage

• Equipment that wasn’t factory-installed

• Medical expenses

• Lost wages

• Deductible costs

• Mechanical repairs

• Funeral expenses

• New car replacement

• Lease and loan security deposits

An important factor to consider is that gap insurance does not help you replace your vehicle after it’s designated a total loss. In many cases, the gap insurance payout is sent directly from your insurance company to your auto lender. If you’re concerned about replacing your vehicle after an accident, new car replacement coverage is more appropriate. Depending on your preferred insurance company, you may be able to find a coverage plan that includes both gap coverage and new car replacement coverage. Bundling services usually results in a discount, so it may be worth looking into when choosing coverage for your new or leased vehicle.

Who Needs It?

Gap insurance is best suited for individuals purchasing a brand-new car. It’s common knowledge that many financing lenders require buyers to have both collision and comprehensive coverage until the vehicle is completely paid off. In some cases, these companies require drivers to acquire gap insurance as well.

Additionally, individuals who prefer to lease vehicles instead of buying them are often required to have gap insurance. Many leased vehicle agreements actually include gap insurance in the total cost of the lease. If it is not included, however, the driver is usually expected to provide proof of gap insurance coverage within a certain period of time.

When purchasing or leasing a new vehicle, you should always check your coverage paperwork thoroughly to determine whether gap insurance is or is not included.

Other circumstances during which purchasing gap insurance is a good idea are when you:

• Buy a vehicle of significant value

• Put less than 20 percent down on your initial car purchase

• Agree to financing over a 60 month period

• Buy a vehicle make and model that loses value faster than average

• Roll over negative equity from a previous auto loan into your new one

• Are part of a single-car family that depends on regular transportation

• Don’t have enough cash savings to cover the ACV-loan gap if your vehicle is stolen or totaled

• Drive more than 15,000 miles on average per year

An important determining factor should be mileage driven, as added miles will depreciate the value of a vehicle very quickly. According to the Department of Transportation, average drivers put 13,476 miles on their vehicle each year. If you know you drive more than this, gap insurance can be very beneficial.

The GAP auto insurance coverage is a plan that is available to individuals and companies alike. This plan will provide the coverage that you need for your vehicle, but in a cost-effective way. It is important that you make sure that you are getting the best deal when it comes to insurance. You want to choose the coverage that will work best for you, but at the same time you want to get the coverage that will give you peace of mind.

You may be wondering what GAP auto insurance coverage, and this is something that you will want to consider as you look into getting a policy. There are many different benefits and ways that this plan can help you out, but you must know what it is before you make a decision on what you want to do.

The best thing about GAP is that it provides the best protection for you without making it impossible for you to get affordable coverage. There are several different plans that you can get with this company, and all of them are tailored to make sure that you are getting the most coverage for your money. You want to make sure that you are making the right choice when you are looking at the various options that are available with this type of plan.

Another thing that you will find in this plan is that you can save money on your premiums. If you go over the limits of your coverage, you may not pay anything for it, but if you stay under your limit you will pay for the difference. This is something that can help you save hundreds of dollars every year.

One other good part about this policy is that it will help you out if you get into an accident. When you have this type of coverage, you will have the ability to get the repairs and services that you need for your vehicle.

It is a good idea to check into the different packages that they offer and see if there are any other benefits that you can add to it. This will help you see that you get the best policy for the best price possible. If you are trying to get the best coverage possible, then you will want to consider the different options that are available.

Another good reason that you should consider GAP is that they will be able to give you great customer service. The people that work here will be able to answer any questions that you have about your coverage. If you have any concerns that you have regarding your car, you will be able to speak with someone about it. This is something that can be extremely helpful.

These are some of the reasons why it is a good idea to look into this plan when it comes to finding a provider. There are many different benefits that you will get with this policy, but you want to make sure that you are getting the best deal possible. You want to ensure that you are getting the best coverage possible. If you do not want to go over your limit on your auto insurance, then this is a good option for you to look into.

There are many things to look at when it comes to looking at GAP insurance. One thing that you will want to take a look at is how they will be able to help you with things such as this. This can help you to ensure that you get the best coverage possible for your vehicle.

Another thing that you will want to take a look at is their policy terms. This can help you see that you get the best policy possible for your vehicle. By knowing what is going to be covered in your policy, you will be able to know what to expect in case something does happen. and how they will be able to fix the situation.

The fact is, it will help you see that Gap auto insurance is a great place to go. If you are looking for a great policy that is going to protect you and your vehicle, then you will want to look into it. This is a good place to go to get this type of coverage.

A gap insurance plan with car dealers can be likewise costly to make feel. Guarantee to look between the car dealership, car insurance companies as well as organizations that focus on area insurance coverage. Your finest offer could come from your existing automobile insurance carrier if you presently have full coverage, you might have the ability to include space insurance plans for as low as $20 each year.

It is essential to understand an insurance company's refund strategy before buying room insurance plan. May Be useful to call your state commerce division of the insurance coverage commissioner office to identify state legislations and also plans beforehand, or have an insurance provider decline to release a repayment. GAP insurance coverage only loads the room between the real money worth of a vehicle at the time of an insurance claim and the present amount still owed on an automobile financing.

Failure can vary by state regulations and/or by the insurance plan provider. While you may seem like your vehicle insurance coverage is robust, automobile insurance firms do not supply any type of kind of one plan called "full security" that's made to secure you versus every chance. Rather, you get much more defense by layering different type of insurance coverage

Including space insurance to your existing protections can be an outstanding method to submit your safety in addition to off the highway, acquiring you closer to the suitable full coverage. Requirement detailed as well as crash autos and truck insurance plans aid spend for the replacement of your truck if it's a covered total loss around the constraints of your policy and the automobile's real money value.

If you want to find a cheap car insurance policy, you may want to look at all of the options that are out there. You can get discounts for being a safe driver and by taking some basic safety classes. The reason that they give you discounts is because they know that if you are a safe driver, then you will not have accidents and be a good driver.

The other thing that you can do in order to get a low cost car insurance policy is to take advantage of the gaps in your coverage. If you do not have a gap in coverage, they may raise your rates a bit, but the savings can be substantial.

GAP coverage is available as a part of your policy, but it is more affordable than purchasing a separate policy. If you need the gap coverage, it is important that you shop around and find a policy that will cover you in case of an accident. There are policies that will cover you and then there are policies that will not. It is important to determine which type of coverage you need before making your final decision.

When you search for gap coverage, you will want to ask the insurance companies how long the gap coverage will be available. If the insurance company cannot give you an answer to that question, you will want to go with another company. In most cases you will be able to get the coverage you need for up to one year.

You will also want to talk to the person that will be giving you the gap coverage about what is covered in your policy. If you have any questions, ask them and they should be able to answer them to your satisfaction. If you are unsure, make an appointment and talk to someone that can answer your questions. This way, you can be assured that you are getting quality coverage.

When you look for gap coverage, you will also want to make sure that you are checking into the deductibles that you will be required to pay out of pocket. If you have medical issues that require expensive treatments, you will want to have insurance that has a high deductible. If you do not have medical bills that require the high deductible, you will be able to lower the cost of the premium in other areas.

A cheap car insurance policy with GAP coverage is an option that you should consider if you are looking for a way to reduce the costs of your insurance policy. You can find many different policies that will allow you to purchase an inexpensive coverage that you can use for years. If you are worried about raising the premiums and have not had any accidents in the past, this may be a great solution for you.

You can use gap coverage to find a cheap car insurance policy with no questions asked. However, you will still have to make sure that you are shopping around in order to make sure that you are saving money.

Another thing you should know about gap coverage is that you will have to pay the same premiums that you would when you purchased a full coverage policy. The difference is that you will have to pay that difference before the gap has been closed.

The last thing you want to know about gap coverage is that it only covers accidents that happen on the road. There are instances where your vehicle may get damaged on the side of the road or someone may get injured while you are at work. If this were to happen, you may not be covered.

You should always take the time to determine the best coverage for your needs before shopping for a cheap car insurance policy with gap coverage. The reason for this is because you will want to ensure that you are getting the most amount of coverage for the least amount of money possible.

Before purchasing a cheap car insurance policy with gap coverage, you should compare different options that are available to you. You may find that a discount that you qualify for, or you may find that you are able to purchase additional coverage that will save you even more money. In order to find the best plan, you will want to review several options and then make a final choice.

Is It Worth It?

While gap insurance is perfect for certain situations, it isn’t always necessary. This is especially true for individuals interested in purchasing used vehicles that are at least six years old. Not only are auto loans usually lower for older vehicles, but the gap between the ACV is less.

Circumstances during which purchasing gap insurance is unnecessary are when you:

Already know that the worth of your vehicle exceeds your auto loan

• Have enough money to continue making payments on the auto loan even if the vehicle is declared a total loss

• Won’t need to replace your vehicle after being damaged beyond repair

• Will be paying on your auto loan for a short time (less than 12 months)

The best way to determine whether gap insurance is worth the expense is to carefully compare the amount owed on your auto loan to your vehicle’s ACV. You can usually obtain an estimated value of your car or truck by utilizing sites like Kelley Blue Book. If you owe more on your loan than your vehicle is worth, gap insurance is usually beneficial.

Gap Insurance Providers

While you can purchase gap insurance from an auto dealership, financing institution, or leasing agency, many car insurance companies offer coverage as well. Every policy will be different, with varying regulations and costs. In order to find a policy that suits your needs, vehicle, and budget best, take time to research all of the options thoroughly.

The following insurance companies offer some form of gap insurance or loan/lease payoff coverage:

• American Family

• Nationwide Insurance

• Allstate

• Farmers

• Trusted Choice

• Progressive

• Esurance

• Travelers

If you’re financing your vehicle through the insurer’s bank, you may also qualify for gap insurance coverage from organizations like the American Automobile Association, State Farm, and USAA. You can also purchase gap insurance from a stand-alone gap insurance provider. Many of these are online and require a one-time payment made up front. Examples include Gap Direct and Gap Insurance Quotes.