Everything You Need to Know About GAP Insurance
Let’s not waste too many words on introductions and get right to the point.
What is GAP?
It stands for Guaranteed Asset Protection. It means that in case of the total loss of property – vehicles – as a result of a theft or an accident with severe damage (repairs will cost more than buying a new car) through a GAP-program the car owner will receive compensation for its value without regard to depreciation.
Why is this important?
- Most insurance companies assume that as soon as a car leaves the dealership, it loses 20% of its value.
- In the first year of use, the market value of the vehicle decreases by 10-18%, and the number of benefits under other insurance programs will be adjusted by them.
- During three years of usage, all cars of the “economy” category lose in price from 30% and more.
In other words, without extended theft insurance in the first year of use, the driver will not get the amount of money he spent to buy the car. But with GAP he will.
GAP insurance is especially important for leased cars. Because the payment the owner receives under regular insurance for a total loss of the car will be lower than the amount he or she owes the seller. Because of this, many lease requirements spell out right away that GAP insurance is mandatory. In some cases, it is even automatically included in the price.
So if you’re not sure if you have GAP insurance, you can call your dealer to clarify the details For loaned cars, GAP insurance often has to be purchased on your own. The advantage is that in this case, you can turn to third-party insurance companies and save a little money.
GAP insurance refund
If you pay the full amount for a new vehicle before the deadline, however, you may be eligible for a GAP insurance refund. To do this, you need to contact your insurance company with proof of payment. Keep in mind that only unused premiums will be refunded to you.
In addition to copies of documents from the bank about the payment, you will need an official statement of the current mileage of the car (you can ask the dealer) and a completed form of cancellation of the insurance policy.
It will take you an average of 1-2 months to do the paperwork and get the refund. Usually, the funds are returned in the form of a check.
The GAP insurance refund is entirely up to you, not the insurance company, because the company does not have to notify you when the opportunity arises, nor tell you about it in advance. Remember, any insurance company wants to keep their income.
So a GAP is a very useful thing, especially if you are buying a very expensive car on lease or loan. Of course, we can’t cover all the details of the policy and the refund in this article. Still, we’ve tried to give you a basic direction in which to look for information and generally tell you about the options available to you.