17 May 2023

What is gap insurance and why do you need it?

Posted By Darrigo & Diaz

What is gap insurance

If you are buying a new car, don’t drive off the lot without purchasing a special type of car insurance. In this blog, we explain what gap insurance is and why every new car owner in Tampa should add it to your policy.

What is gap insurance?

Gap insurance, also known as guaranteed asset protection insurance, is an optional form of car insurance coverage. It covers the gap between the actual value of your car and the amount you still owe on your loan or lease.

How does gap insurance work?

The moment you drive off the lot, the value of a new car begins to depreciate. On average, your car depreciates between 15 and 20% in just the first year!

Your auto insurance company will usually compensate you for the current market value of your vehicle if your vehicle is totaled due to theft or accident. You may, however, be left with a significant financial burden if the amount you receive does not cover all the outstanding obligations on your auto loan or lease.

This is where gap insurance comes into play. It covers the difference between the amount you owe on your loan or lease and the actual cash value provided by your auto insurance company.

Why do you need gap insurance?

1. Protection against depreciation: Vehicles tend to depreciate rapidly, particularly in their first few years of ownership. Gap insurance protects you from the financial impact of depreciation.

2. Financial security: With this coverage, you will not have to worry about making loan or lease payments on a vehicle you no longer possess or facing a considerable outstanding balance after a total loss.

3. Loan and lease flexibility: The gap between the vehicle’s value and the amount you owe can be substantial if you choose to finance or lease a vehicle with little or no down payment. By covering this gap, gap insurance protects you from potential financial strain.

4. Affordability and convenience: You can often add gap insurance to your policy for just a few dollars per month. Industry reports indicate gap it just $20 to $60 per year depending on the type of vehicle you purchase.

The bottom line

While gap insurance is not mandatory, the protection it provides is invaluable. You avoid unexpected financial burdens by covering the gap between the value of your car and what you still owe. As Tampa car accident attorneys, we recommend everyone purchase gap insurance when buying or leasing a new car.

Remember, insurance is all about being prepared for the unexpected.

Injured in an auto accident in Tampa? Contact our Tampa car accident attorneys.

Call (813) 437-5523 now for a free case evaluation

If you are involved and/or injured in an auto accident in Tampa, contact the experienced Tampa car accident lawyers at Darrigo & Diaz right away. We can help you navigate the insurance process. And, we will ensure you receive the compensation you need to pay for medical bills and vehicle damages.

We offer free consultations and you do not have to pay anything unless we win your case.

Call (813) 437-5523 now to schedule your complimentary meeting with our experienced Tampa Bay accident attorneys.

Categories: Insurance Tips
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