GAP Insurance benefits on New Automobiles

As per the concept of "fair market value," your brand new vehicle is depreciated in value by up to twenty percent as soon as you drive it away from the dealership. If your new car is stolen and not recovered, or totalled due to an accident or fire, you’ll have to cough up a large portion of your loan regardless of your comprehensive auto insurance. The value placed on your new drive by the insurance company may give you a jolt as the insurance company uses the market value of the automobile in their assessment. This could spell financial disaster for you as the onus of making up the shortfall would rest on you. So you end up paying for a car that you no longer use.

This is where GAP insurance comes in for covering your new vehicle against write off’s and putting your mind at peace while you drive your new car or van.

Previously known as Guaranteed Asset Protection and often a required addition to a lease contract, auto GAP insurance covers you in situations when you owe more on the lease than the car is worth, in case it is stolen or totalled. The losses that are not covered by the vehicle insurance policies are taken care of by the accompanying GAP insurance.

When a vehicle is written off there is often a 'Gap' between what you paid for the vehicle, or the cost of replacement and the market value of your vehicles as assessed by insurance company, (hence the term 'Gap Insurance'.)

So if a new replacement vehicle is twenty thousand pounds and the pay-out valuation of the insurance company is fifteen thousand pounds it is going to leave a gap of five thousand pounds which has to come from somewhere. That somewhere is you, unless you have insured the short-fall. Higher value vehicles can leave an even larger gap which is worth noting.

Usually automobile buyers are not aware of the GAP insurance as it is not offered everywhere and only a few insurance companies offer them. Loan companies and car dealers may also not take pains to inform you about GAP Insurance for Leased Cars in UK. Therefore a large number of people end up suffering due to ignorance about GAP insurance.

Those who drive an older car and do not anticipate buying a new vehicle in near future may not need to know about GAP insurance. But if you are looking to buy a new sleek drive, GAP insurance becomes indispensable for you or else you might end up paying on a loan for which you are not going to get anything.