What Is Gap Insurance and Why Do You Need It?

When it comes to purchasing a vehicle, most people think of financing, taxes, and insurance. But did you know that there is another type of coverage you should be considering? It’s called gap insurance — also known as Guaranteed Asset Protection (GAP). This type of coverage is an important part of any car buyer’s insurance portfolio. Let’s take a look at what gap insurance is and why it is so important.

What Is Gap Insurance?

Gap insurance is a type of auto coverage that pays the difference between the actual cash value (ACV) of your car and the balance left on your loan if your car is stolen or totaled in an accident. In other words, if you have gap insurance, it will cover the difference between what your insurer pays for your totaled car and what you still owe on your loan. Without gap insurance, you would have to pay this difference out-of-pocket.

For example, let’s say that you purchased a used car for $20,000 with a loan balance of $14,000 after putting down $2,000 as a down payment. A year later, the ACV of your car drops to $10,000 due to depreciation. If your vehicle was then stolen or totaled in an accident, your standard auto insurer would only pay out the ACV amount — which is $10,000 — leaving you with a remaining balance owed on the loan of $4,000. With gap insurance in place though, this extra expense would be covered by your policy.

Why Do You Need Gap Insurance?

The main reason why gap insurance is important is because vehicles depreciate quickly over time — much faster than most people realize. On average cars lose 20% – 25% of their value within one year after purchase and up to 50% after three years. That means after just three years most cars are worth half their original purchase price! Because vehicles depreciate so quickly compared to loans lasting five or six years (or longer), it’s very easy for the value of a vehicle to drop below its actual loan balance if something unexpected happens. That’s where having gap insurance comes in handy!

In summary then, gap insurance can save you from financial hardship by covering any remaining balance on your auto loan should something happen to your vehicle before it has been paid off in full. Although not required by law like other forms of auto coverage such as liability or collision coverage are; having GAP coverage can greatly minimize any potential losses associated with owning a vehicle should something unfortunate occur while making payments towards it — making it well worth considering when shopping for auto coverage!

Gap Insurance from Speedcraft Nissan

At Speedcraft Nissan, we strive to make the car buying process as smooth and stress-free as possible. That’s why in addition to offering cars at great prices and financing options, we also provide gap insurance protection for our customers. When you purchase a vehicle from us, you’ll have peace of mind knowing that your newly purchased vehicle is covered in the event of an accident or theft — no matter what its actual cash value might be. So if you’re in the market for a car, stop by Speedcraft Nissan today and let us help you drive away with peace of mind!