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Everything You Need To Know About Gap Insurance!

2022-05-11

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Author: Mike Friskney - www.driving.ca

You're excited. You've just picked up your new $35,000 vehicle. You drive it off the lot and head for the highway to take it for a spin. You're cruising through the last intersection before the on-ramp when… you get T-boned.   

You're okay, but your vehicle isn't. The accident has totalled your brand-new wheels.   

A few days later you hear back from your  car insurance  company regarding your claim. They confirm that they will be reimbursing you for the full value of your vehicle -- $28,000. 

"What?" you ask. "It's worth $35,000."  

It was. But then you drove it off the lot. 

In most cases, new vehicles depreciate by 20 per cent as soon as they leave the lot. Regular insurance (i.e. comprehensive and collision) covers only the depreciated value of your vehicle. Hence, in the scenario above, the insurance company is only going to pay $28,000 of the $35,000 purchase price, and you're going to be left owing the $7,000 difference out of your own pocket.

This outcome would have been different if you had gap insurance.  

What is gap insurance?
Gap insurance, sometimes referred to as "guaranteed auto protection" insurance, is extra coverage you can purchase that protects you if your vehicle is totalled or stolen and the difference between what you owe on your vehicle loan or lease is more than the actual value of your vehicle. In other words, gap insurance comes in handy when the money from your insurance company isn't enough to cover the balance of the money you borrowed to finance your vehicle.  

How much does gap insurance cost? 
It's hard to say exactly what the cost of gap insurance is, but estimates peg it at around five per cent of the cost of your  collision insurance  and  comprehensive insurance.  Depending on the type of vehicle you're driving, this coverage can cost  between $350 to $800 .  

Where can you purchase gap insurance?
Car dealerships and some insurance companies sell gap insurance.   

Before you head over to the dealership to buy your new vehicle, though, contact your insurance company first and get a quote for gap insurance. That way when you're at the dealership and they ask you if you would like gap insurance rolled into your monthly vehicle payment, you'll have a second quote to compare it to. Often, gap insurance purchased from an insurance company costs less than if it were purchased from a dealership.  

If you're planning to lease your new vehicle, you'll find in most cases gap insurance is included as part of the lease.  

Continue reading HERE!

Source: https://driving.ca/features/insurance/what-is-gap-insurance-and-should-you-get-it

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