What is Gap Insurance?

Central Auto Insurance Agency.inc23 Aug, 2023Finance

"The value of a new automobile begins to depreciate as soon as you drive it off the lot. If you total your new automobile during the first few years, you may owe the bank more than the car is worth. This disparity is covered by ?guaranteed asset protection?, sometimes known as ?gap? insurance. Gap insurance kicks in if you finance your vehicle and file a complete loss claim ? either after your vehicle are totaled or after it is stolen. When you file a complete loss claim, your insurance will pay a maximum of the vehicle?s actual cash worth (ACV). In some situations, the amount you still owe in auto payments may surpass the ACV of your vehicle. This is referred to as having negative equity or being underwater on your loan. Gap insurance, also known as loan/lease payback insurance, assists you in repaying the debt in this case.