When you buy a new car, you may be asked if you would like to purchase GAP insurance, but what exactly is it?

GAP (Guaranteed Auto Protection) Insurance is an optional coverage for newer cars which covers the gap between the money you still owe on the car and what the car is worth in the event that your car is totaled in a covered loss. GAP policies may vary in the types of losses which are covered, so be sure to research the coverages before purchasing GAP insurance.

One reason to purchase the coverage is if you have bought or leased a new vehicle and couldn’t afford a large down payment. If you could only afford a small payment, it may be a good idea to purchase GAP insurance due to the fact that vehicles depreciate very quickly.

Also, if leasing a vehicle the leasing company sometimes includes GAP insurance in the contract, so review your contracts before purchasing coverage.

An example of when GAP insurance would come into play would be if you purchased a new car and a couple weeks later you swerve to avoid hitting someone and end up crashing your new car. When the insurance company reviews the damage they may determine your car is totaled as it would be more expensive to repair the vehicle than it is actually worth. The insurance company determines the Actual Cash Value (“ACV”) is $20,000, but you paid $25,000 for the car a couple weeks ago and have not yet made any payments. Without GAP insurance your vehicle lender would still require you to pay for the loan in full. GAP Insurance will be there to pay the $5,000 difference between the ACV and what you owe; you would only be responsible for your deductible.

If you have any questions about GAP Insurance or if you would like your policies reviewed, call The Barclay Group at (856) 829-1594 or email me at rdevine@barclayinsurance.com