Well, maybe. 

Gap insurance stands for Guaranteed Asset Protection insurance. It is an optional, add-on coverage to cover yourself financially that helps certain drivers cover the “gap” between the financed amount owed on their car and their car’s actual cash value (ACV), in the event of a covered incident where their car is declared a total loss. Gap insurance does not cover deductible costs.

When you purchase or lease a new vehicle, it begins to depreciate in value the moment it leaves the car lot. Statistics show that most cars lose 20 percent of their value within a year. Standard auto insurance policies cover the depreciated value of a car. This means that a standard policy pays the current market value of the vehicle at the time of a claim.

Let's say that maybe your insured car is completely totaled in an accident, or stolen and unrecovered. Your auto insurance may give you a settlement based on the car’s actual cash value (ACV), and not for the full amount you paid for it. An ACV settlement may not cover what you still owe on your auto loan or lease and this gap between what you’ve paid and what you owe can be substantial.

A good rule of thumb when deciding if you need Gap insurance is to consider if:

• You made less than a 20 percent down payment
• The vehicle is financed for 60 months or longer
• The vehicle was leased as carrying gap insurance is generally required
• You purchased a vehicle that depreciates faster than the average
• You rolled over negative equity from an old car loan into the new loan

Your car dealer may offer to sell you gap insurance but it is good to note that most car insurers also offer it at typically a lower rate. Note though at some insurers require your vehicle to be brand new in order for you to purchase gap insurance. So, if you are the original owner of the vehicle and the vehicle is not older than two or three model years you may have this optional coverage available to you. Check with your insurer to see what qualifications are required for you to buy gap insurance.

Gap insurance cost varies depending on the actual cash value of your car, your age, the state you live in and your previous car insurance claim. 

Are you still be asking yourself if gap insurance is worth it? It most certainly could be in the right circumstances. Gap insurance takes effect in the event of a complete loss of your vehicle, such as theft or a covered accident which renders your car a “total loss.” And although you might be a cautious, responsible driver, not everyone else on the road is. Not having gap insurance if you are “upside down” on your car loan could mean you are reimbursed for thousands less in the event of a complete loss. Are you willing to take a large financial gamble on this gap? Learn more about whether gap insurance is right for you by calling your specialized insurance representative at Waldorff Insurance and Bonding today.

*** This article provides general information, and should not be construed as specific legal, HR, financial, insurance, tax or accounting advice. As with all matters of a legal or human resources nature, you should consult with your own legal counsel and human resources professionals. Waldorff Insurance and Bonding shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein.