What is Guaranteed Asset Protection?

Guaranteed asset protection (GAP), also called “gap” insurance, covers the difference between a vehicle’s actual cash value and the amount that is still owed on the vehicle in the event that it’s determined a total loss. A total loss could be an accident that causes the vehicle to become undrivable or a theft where the vehicle is not recovered.

For example, if a car is totaled with a balance of $15,000 left on it and an insurance company pays $10,000, gap insurance would cover the remaining $5,000. Sometimes, gap insurance will also cover your insurance deductible.

Gap insurance is often required before a car loan will be issued. Some insurance companies may require you to lease or finance a new vehicle in order to qualify for gap insurance. Other reasons to think about gap insurance are if:

  • Your loan is longer than 48 months
  • Your down payment was less than 20% of the vehicle’s price
  • You drive quite a bit (because your vehicle will depreciate in value more quickly)

How Important Is It?

Since vehicles depreciate in value pretty much immediately (statistics show that a vehicle may lose as much as 20% of its original value in the first year), insurance will only ever pay what the car is worth; in other words, insurance companies will never pay the purchase price of a vehicle. Because of this, loans are often more than what the car is worth.

How Soon Should I Get It?

Typically, purchasing gap insurance is part of the leasing/financing process. This is simply a way for financial companies to protect themselves. This is also an easy method of getting GAP, as the payments would be wrapped up in your loan payment.

Insurance companies suggest also investing in gap insurance if your vehicle is no more than three years old. Companies may also want you to be the original owner of the vehicle.

Where Can I Find It?

You can buy GAP from your auto insurance company, through the dealership you are purchasing the vehicle from, or through a company that sells gap insurance independently.

Conclusion

Protecting your assets in case of a worst-case scenario is very important. Guaranteed asset protection is a great investment, whether it’s required or not.

Vantage Financial offers different types of financing, including GAP. Give them a call to explore your options!