What Is GAP Insurance?

 
When you buy a new vehicle, you can add additional insurance coverage to help protect your investment in Schaumburg and beyond. Among those coverage options is GAP insurance. What is GAP insurance, and what does GAP insurance cover? Does GAP insurance cover hail damage? GAP insurance stands for “Guaranteed Asset Protection,” and helps cover the “gap” between your vehicle’s worth and the amount of money you owe on your auto loan.

What GAP insurance covers are incidents when your car is totaled, with the exception of collisions. Learn more about GAP insurance coverage today with the finance experts at Biggers Chevrolet! Here are some of the questions we’ll go over regarding GAP insurance coverage:

• What is GAP insurance?
• What does GAP insurance cover?
• How does GAP insurance work?
• Do you need GAP insurance?

First, let’s look at what GAP insurance covers. Does GAP insurance cover hail damage? Probably not, since GAP insurance is used if your car is totaled. It’s unlikely that hail will lead to a relatively new car being declared a total loss.

So, what does GAP insurance cover? When you purchase a vehicle, there are two important values to remember: its trade-in value and the amount of money you owe on your automotive loan. The difference between your vehicle’s assessed value and the amount of money you owe is called equity. Positive equity is when your vehicle is worth more than the amount of money you owe.

GAP insurance doesn’t typically have much effect on positive equity situations, as you’ll have leftover money after your insurance company has paid out on your totaled vehicle and you’ve paid off the auto loan. However, negative equity is when GAP insurance comes in handy since your vehicle’s value is less than the amount of money that you owe. If your vehicle gets totaled during your Streamwood drives, someone has to pay that negative equity to your auto loan, even if you no longer have the vehicle. If you’re in a negative equity situation, GAP insurance will typically cover it.

What Does Gap Insurance Cover?

GAP insurance coverage can vary depending on your specific provider, but, it’s often nice to have if you need it. It’s important to note that GAP insurance is not a replacement for liability or comprehensive automotive insurance. It’s more of supplemental coverage to help protect you on your Bartlett commute. Take a look at what GAP insurance can cover:

Gap Insurance Covers:

• Accident
• Fire
• Theft
• Vandalism
• Natural disasters (tornado, hurricane, flood, etc.)

Gap Insurance Does NOT Cover:

• Engine failures and other mechanical repairs/malfunctions
• Death
• Deductible (though some gap insurance policies allow this)
• Extended warranty work

GAP insurance covers hail damage only in cases when the damage is so severe that it would cost more to repair the car than to replace it. But in case of more severe natural disasters and extreme weather, it’s more likely that your car will sustain damage that GAP insurance will cover.

Do I Need GAP Insurance?

Many drivers like you are probably wondering, “Do I need GAP insurance?” While GAP insurance is not legally required, we do recommend it. If the dealership you’re working with offers a plan that includes deductible coverage, GAP insurance can be particularly helpful. Ultimately, adding GAP insurance onto your car insurance policy will award you peace of mind as you drive around Elgin and help you save money should an accident occur.

Explore All of Your Insurance & Finance Options at Biggers Chevrolet

Whether you’ve already applied for financing and are ready to sign that dotted line, or you’re just beginning the research process, it pays to know about your various insurance options. Understanding exactly what you want, and more importantly what you need, before you purchase your new car can end up saving you hundreds of dollars, if not more, in the future. Do you have lingering questions about gap insurance or additional car loan questions like whether you can remove a cosigner from a loan, if you can pay your loan off early, and how to calculate auto loan interest? You can give us a visit or contact our team online, and we’ll be happy to help!