There are certain mandatory insurance coverages you have to get to be able to drive your vehicle legally. However, some add-ons can be very beneficial for you depending on your circumstances and the characteristics of the vehicle you are driving. One of these is the Guaranteed Asset Protection (GAP) insurance. Therefore, you must know what is gap insurance specifically and if it is a good option for your needs.
What Is Gap Insurance?
In short, this type of insurance covers the gap that exists between the actual value of your vehicle and the financed amount. This is especially useful when there is a total loss of the car after an accident. Why does this gap exist, though? After you get a new vehicle, whether you bought it or leased it, its value starts to reduce immediately. It has been reported that after only 12 months, a large number of cars have already lost 20% of their value. The problem is that your regular insurance policy covers the value of the car as it stands at the moment of an accident. This means that instead of getting paid for what you spent when you got the vehicle, you would get paid the depreciated value. This can have different complications. One of the most common ones takes place when you have paid a small deposit when you financed your vehicle. Then, it is likely that during the first few years of ownership, what you owe will be more than what the current market value of your car is. If you are involved in a major accident, your regular insurance will pay for the current value of your car and the gap insurance will pay for the remaining amount, which is the difference between the value of the vehicle when you first bought it and the current value.
Advantages of Getting GAP Insurance for New Cars
Coverage of an important financial gap
The gap created by the depreciation of your vehicle can be significant. The last thing you want is to have an added debt in the case of a major accident. Sometimes, the best option is to contact an experienced accident lawyer in Las Vegas to make sure you avoid situations as such.
Flexibility in the way you pay for this type of insurance
Most gap insurance providers offer different payment methods that allow you to customize your payment plans. This means that you will be able to enjoy the benefits before you have fully paid for this product.
Peace of mind in case your vehicle is totaled
There is already more than enough stress associated with totaling your vehicle. Plus, if you or anyone that was in the car were injured, you’ll want to make health concerns your main priority.
Additional coverage beyond what your standard insurance offers
Insurance companies do not offer anything such as “full coverage”. It is more thorough to make use of add-ons and using different types of coverage to ensure you are fully protected in case of any eventualities.
Advantages of Getting Gap Insurance for Leased Cars
Covering the depreciation
Leased vehicles depreciate as quickly as if you had purchased them. Therefore, you are likely to owe a significant part of the lease if you started with a small deposit.
As time goes by, the difference between what your car is worth and what you owe decreases, just as if you owned the car. This is why gap insurance is usually used for the first three years only. If you reached a good lease agreement, you might only need gap insurance for a shorter amount of time.
What Is the Cost of Gap Insurance
The total cost of gap insurance is going to depend on different things, like on the way of its purchase from a car insurance company, a loan lender, or dealership. Depending on your provider the cost will vary.
Typically, when bought from a dealership, GAP insurance costs between $400 and $700 and between $20 and $40 per year with car insurance policy added.
Companies offering this type of insurance will also consider:
- How old you are
- Special concerns specific to Nevada
- The present value of your vehicle
- Any prior car insurance claims
Is GAP Insurance Worth The Money?
Gap insurance is generally worth it if you didn’t make a large deposit when you first bought or leased your vehicle because you owe a larger amount of money. Other cases in which gap insurance is strongly recommended include:
- You have a loan agreement that is longer than 48 months.
- You drive long distances (this depreciates the vehicle even faster).
- You didn’t make a downpayment.
- Your loan is a high-interest one.
- You got a car that depreciates faster than others.
How to Get Gap Insurance in Nevada
You have different options when it comes to getting your gap insurance.
One of the most common ones is going to your auto insurer and making it part of your monthly payments. The good thing about this is that it allows you to streamline your payments and makes the process easier for you. Some companies offering this product include Liberty Mutual, Travelers, USAA, and Nationwide Insurance.
Alternative Insurance Company
If you do not want to go to your auto insurer, you can make use of companies that offer one-time payments to get your gap insurance. Some companies are even specialized in selling only gap insurance. They might have better offers than your insurer.
Dealership or Lender
You can add payments for your gap insurance to the payments you will make to the lender or the dealer. However, this might lead to increased payments due to added interest. Be aware that lenders should not require gap insurance to give you the money for your vehicle. If they request it, make sure you can check this is an official requirement in the contract. This is why going with your auto-insurer or another company might be your best option. In some cases, switching companies just to get this option might be worth it. If you find yourself in the worst-case scenario in which your vehicle has been totaled, you want to make sure you are properly covered. Consider how much you owe for your care and compare its original value to the current value. If the depreciation has already started and you still have a long way to go to pay your debt, it might be time to get gap insurance.