Gap Coverage
What Is Gap Coverage and How Does It Protect You?
Gap coverage, also known as guaranteed auto protection, provides additional financial protection for car owners. It is a type of insurance that covers the difference, or “gap,” between the amount owed on a car loan and the actual cash value of the vehicle. In the event of an accident, where the car is totalled or stolen, traditional auto insurance will only cover the actual cash value of the vehicle, which may be less than what is still owed on the loan. This could leave car owners in a difficult financial situation, as they would still be responsible for paying off the remaining balance on the loan. Gap coverage helps to bridge this gap, ensuring that car owners are not burdened with the remaining loan balance. It provides peace of mind by eliminating the potential for financial hardship in such unfortunate incidents. Gap coverage is typically recommended for those who lease a vehicle, have a long-term car loan, or purchase a new car that depreciates quickly. It is important to note that gap coverage is an optional add-on to traditional auto insurance and requires an additional premium. However, the cost of this coverage is minor compared to the potential financial risks and consequences that can arise without it. In summary, gap coverage fills the gap between the amount owed on a car loan and the cash value of a vehicle, protecting car owners from significant financial loss in the event of an accident or theft.