If you’re in the market for a new vehicle, you may want to consider GAP (Guaranteed Auto Protection) insurance. When you go to sign your lease or financing paperwork, you will undoubtedly be offered this insurance. It may be helpful to know exactly what GAP insurance for vehicle purchases in MA is and what your options are for purchasing it.
What is GAP Insurance?
Let’s face it – cars can depreciate fairly quickly. Sometimes, the value of your vehicle can actually drop below the amount that you still owe on your loan. For example, your loan balance may be $25,000 but the value of your vehicle is actually $20,000. Your auto insurance will only cover the value of the vehicle. So, if you are in an accident and the car is totaled, your insurance company will only cover $20,000. This means that you need to cover the $5,000 difference yourself in order to pay off the loan. This is where GAP insurance comes in.
Why Purchase GAP Insurance?
First and foremost, GAP insurance only applies to cars that are financed or leased (it is usually required on a leased vehicle). So if you are paying in full – this type of coverage is irrelevant. However, the question now becomes…how much of a down payment are you able to afford? You may want to consider GAP coverage if your down payment will be less than 20% of the cost of the vehicle. As mentioned before, if you were to total the car, the actual value may be less than what you still owe on the loan. In this case, GAP insurance is recommended for purchases with little to no down payment and can be relatively inexpensive in the grand scheme of things. Another consideration is if you are purchasing a luxury vehicle, as the initial depreciation in value is greater on a higher priced car.
Where to Purchase GAP Insurance for Vehicle Purchases
You can purchase this type of coverage through the financing/leasing company at the time of purchase or through your MA auto insurance company. If purchasing it through the financing company, it’s usually a one-time up-front fee that they may offer to roll into your loan. In many cases, purchasing GAP insurance from your MA auto insurance company will be cheaper. You would pay monthly or annually rather than a large up-front fee.
Now that you have a better understanding of GAP insurance, what is covers, and where you can purchase it, you will be a better educated vehicle consumer. Contact your MA insurance agent for a quote on GAP insurance. It can be purchased when you first buy your vehicle or can be added to your policy at any time.