GAP insurance goes above and beyond when it comes to protecting your car in the case of a theft or accident. But how do you know if you need to get it?
Read on to get the low-down on GAP insurance.
GAP insurance stands for “guaranteed asset protection.” It covers the difference between the value of a car when it’s totaled or stolen and the balance of its loan or lease. Vehicles lose 20-30 percent of their value in the first year, and standard auto insurance only pays what a car is worth at the time of the accident. When what you owe on your loan or lease is more than what insurance pays, GAP insurance protects you.
You may want GAP insurance if you made a small down- payment on a new car or agreed to a loan term longer than three years. Research your car to see how quickly it’ll depreciate—if your car loses value quickly, having GAP insurance may be worth it. The same goes if you drive frequently, which reduces your car’s value more quickly.
Keep in mind that you must have collision and comprehensive insurance coverage before getting GAP insurance. Then, the cost of GAP insurance is around five percent of your annual insurance premium. The cost may vary based on location, driver history and car value. If you pay $500 toward comprehensive and collision insurance annually, your GAP insurance will be around $25. How to Get GAP Insurance
GAP insurance is available through your financial institution, an independent insurance agent or the car dealership. That said, dealerships may charge as much as four times more than standard rates. Sioux Falls Federal Credit Union offers GAP insurance and auto deductible reimbursement.
Auto Deductible Reimbursement or ADR and GAP Plus are also available through Sioux Falls Federal Credit Union. ADR pays up to $500 per loss. GAP Plus protects all drivers whether you’re leasing a new or used vehicle. Automobiles, golf carts, jet skis, and snowmobiles may be eligible for coverage.