Driving a car is one of the most dangerous things that you can do. With 91.55% of households reporting having access to at least one vehicle, it’s safe to say most adult Americans have been behind the wheel at least a few times. While having automobile insurance is required in the United States to own and operate a car, the minimum required by New York law will barely cover you if you get into an accident.
Since accidents happen when you least expect them and can happen to anyone at any time, it’s important that you are making an informed decision about the coverage you have when selecting the policy that works best for you. In addition to the traditional coverages in automobile insurance policies like property damage and bodily injury, you may also want to consider something called GAP insurance.
GAP Insurance defined
GAP stands for Guaranteed Auto Protection and provides protection for the difference between what your car is worth and what you still owe on your car loan if your car becomes totaled, stolen, etc. Car owners can purchase GAP insurance to cover them and protect them from having to pay for any gap between the remaining payments on the vehicle and the amount received in insurance reimbursement.
What does GAP protect you against?
Over the last 30 years of practicing Personal Injury law on Long Island, Mark T. Freeley has spoken to countless clients involved in car accidents in Nassau and Suffolk County. In many cases they have had to pay out thousands of dollars for cars they no longer owned even when the car accidents were not their fault. GAP insurance protects against just that, it helps you cover the difference between what your insurance company would pay you for your car and the remaining payments on the vehicle so you can have peace of mind. While in New York state every car lease is required to include GAP coverage as part of the lease, it’s important to know that there is no requirement when you purchase and finance a new or used car.
Why is GAP insurance so important?
There are many instances when having GAP insurance could be a lifesaver. For example, if you bought a car with little to no money down and/or paid over what the car was worth, you likely became upside down in your auto loan as soon as you drove off the lot. This means it might take quite a while before the loan amount and the value of the car begin to balance and the financial repercussions of an accident could dig you into an even bigger hole. Having GAP insurance would cover you from day one of driving off the lot.
Another instance where GAP insurance can be a lifesaver is if you plan to put miles on quickly. According to Investopedia, very few things reduce a car’s value faster than lots of driving. This means that the faster you rack up the miles, the faster you depreciate your car’s value and it’s likely that you’ll be dropping the value of your car more quickly than your payment can keep pace.
How to get GAP insurance
One main way people get GAP insurance is from their new or used car dealer, but it’s important to keep in mind that you must specifically request it if you want to go this route. Another way to get GAP insurance is through most car insurance companies, and possibly for a third or quarter of the price of the dealer. Finally, GAP insurance is available from stand-alone companies such as www.gapdirect.com, that only sell GAP insurance.
The GAP insurance offered by your car dealer is likely the most expensive, so shop around before you purchase it from them as you could save hundreds of dollars by doing your homework. If you purchase it from your car insurance company or a stand-alone company, you also will not be paying interest on the cost like you would if you rolled that cost into your car loan payment. With the insurance companies, you can also cancel the coverage when you don’t owe more on your loan than the value of your car and no longer need the protection.
Remember, if you have already purchased a car and have a loan without GAP insurance, it’s not too late to add it. If you have any questions about GAP insurance or any car insurance related question, Mark would be happy to help. Give him a call at 631-495-9435 for help today.