What is GAP and Why Do You Need It : Savings Corner Presented by Coosa Valley Credit Union

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Gap in coverage can leave you with a significant financial burden if you need to replace your vehicle.

GAP coverage can vary in its specifics, but here are some general guidelines: A minimum of 20% of the car’s market value is typically required. Many insurance policies do not offer GAP coverage, so you may need to purchase it separately. Some policies offer a lower percentage, but this can leave you with a significant gap in coverage. There are several types of GAP coverage available, including full coverage, limited coverage, and custom coverage. Full coverage is the most comprehensive and will cover 100% of the vehicle’s value.

However, if you have a loan outstanding, you may still owe money on the loan, leaving a gap between the insurance payout and the loan balance. GAP coverage helps to bridge this gap by paying the difference between the two.

What is GAP coverage? GAP coverage is a type of insurance that provides financial protection in the event of a total loss or theft of your vehicle. It is designed to cover the difference between the actual cash value of your vehicle and the outstanding loan balance, ensuring that you do not have to pay the full amount of the loan. ### Benefits of GAP coverage

  • Provides financial protection in the event of a total loss or theft
  • Helps to bridge the gap between the insurance payout and the loan balance
  • Can be added to your existing auto insurance policy
  • Typically less expensive than paying the full loan amount upfront

    • How does GAP coverage work? GAP coverage works by paying the difference between the actual cash value of your vehicle and the outstanding loan balance. Here’s an example:

  • Let’s say you have a car loan of $20,000 and the current market value of your vehicle is $15, If your car is totaled in an accident, your standard auto insurance will pay $15,000, but you still owe $5,000 on the loan. Without GAP coverage, you would have to pay the remaining $5,000 out of pocket.

    High credit scores may require additional insurance coverage to protect against financial loss.

    Owns a vehicle that is more than 10 years old. Has a high credit score (some lenders may require GAP coverage for borrowers with high credit scores). GAP coverage is a type of insurance that protects against the financial loss if the vehicle is stolen or totaled and the loan balance exceeds the vehicle’s actual cash value (ACV).

    Understanding GAP Coverage

    GAP coverage, also known as Guaranteed Asset Protection, is a type of insurance that protects you from financial losses if your vehicle is stolen or totaled and the actual cash value (ACV) of the vehicle is less than the outstanding loan balance.

    What GAP Coverage Covers

  • Covers the difference between the outstanding loan balance and the actual cash value (ACV) of the vehicle
  • Typically includes theft, fire, and natural disaster damage
  • May also cover damage from vandalism, collision, or other types of damage

    • Why You Need GAP Coverage

  • Protects you from financial losses if your vehicle is stolen or totaled
  • Helps you avoid paying the difference between the loan balance and the ACV of the vehicle
  • Can be especially important if you have a high loan balance or a vehicle with a low ACV

    • How GAP Coverage Works

  • You purchase GAP coverage as an add-on to your auto loan
  • The coverage is usually paid for in monthly installments or as a lump sum
  • If your vehicle is stolen or totaled, you file a claim with the insurance provider
  • The provider pays the difference between the outstanding loan balance and the ACV of the vehicle

    • Examples of GAP Coverage

  • Let’s say you purchase a car for $30,000 with a 20% down payment and a 5-year loan.

    This can be a significant financial burden, especially if you have a large loan balance or a low down payment. Here are some key benefits of GAP coverage:

    Benefits of GAP Coverage

  • Reduces financial risk: GAP coverage helps protect you from financial losses due to car theft or total loss. Avoids debt: By covering the remaining balance on your loan, GAP coverage can help you avoid debt and financial stress. Provides peace of mind: Knowing that you have GAP coverage can give you peace of mind and reduce anxiety about the financial implications of a car accident or theft. ### How GAP Coverage Works*

    • How GAP Coverage Works

    GAP coverage typically works by paying the difference between the actual cash value of your car and the outstanding loan balance.

    Understanding GAP Insurance

    GAP insurance is a type of insurance that protects you from financial loss if your car is stolen or totaled and the actual cash value of the vehicle is less than what you owe on the loan. This type of insurance is often required by lenders, but it’s not always necessary. Here are some key points to consider:

  • What is GAP insurance?: GAP insurance is a type of insurance that covers the difference between the actual cash value of your car and the amount you owe on the loan. Why do I need GAP insurance?: You may need GAP insurance if you have a loan with a high loan balance or if you’re driving a high-value vehicle. How does GAP insurance work?: GAP insurance typically covers the difference between the actual cash value of your car and the amount you owe on the loan.

    Understanding GAP Coverage

    GAP coverage, or Guaranteed Asset Protection, is a type of insurance that protects drivers from financial loss if their vehicle is stolen or totaled. It’s a crucial aspect of vehicle ownership, especially for new drivers or those who are leasing a car.

    What GAP Coverage Covers

  • Provides financial protection in the event of a total loss or theft
  • Covers the difference between the actual cash value of the vehicle and the outstanding loan or lease balance
  • Typically includes additional benefits, such as rental car coverage and roadside assistance

    • Benefits of GAP Coverage

  • Protects against financial loss due to theft or total loss
  • Helps maintain a good credit score by ensuring timely payments
  • Provides peace of mind and financial security

    • Common Misconceptions About GAP Coverage

  • Many people believe that GAP coverage is only necessary for new drivers or those who are leasing a car. However, it’s also beneficial for drivers who own their vehicles outright. Some individuals may think that GAP coverage is only available through the dealership. However, it’s often available through insurance companies and credit unions. ### How to Choose the Right GAP Coverage

    • How to Choose the Right GAP Coverage

  • Consider your vehicle’s value and the outstanding loan or lease balance
  • Research different insurance companies and credit unions to find the best coverage options
  • Read reviews and ask for recommendations from friends or family members

    • Tips for Maintaining GAP Coverage

  • Review your coverage regularly to ensure it’s still necessary
  • Make sure you understand the terms and conditions of your policy
  • Consider increasing your coverage limits or adding additional benefits

    • By understanding the benefits and importance of GAP coverage, drivers can make informed decisions about their vehicle insurance and protect themselves from financial loss.

    Ready to secure your vehicle and your finances? Visit Coosa Valley Credit Union to explore GAP coverage and other financial services.

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