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GAP Insurance for Your Car

Article

The new-car buyer's worst nightmare: shortly after you drive the car off the lot, you total it, and your insurance will cover much less than what you owe. That's where guaranteed auto protection comes in handy.

It’s a new-car buyer’s worst nightmare - shortly after you drive the car off the dealer’s lot, you have an accident and the car is totaled. It gets even worse when it comes time to collect on your car insurance because the value of your car is probably going to be a lot less than you owe on it or what it would cost you to replace. That’s where a little-known coverage called GAP (guaranteed auto protection) can come in handy.

According to car insurance experts, anyone who leases a car, finances a new-car purchase for 72 months, buys a car that depreciates quickly, or puts a down payment of less than 20% on a new or late-model pre-owned car is a prime candidate for GAP insurance.

The good news is that most lease agreements and some auto insurance policies already come with GAP coverage. Check your lease agreement to make sure GAP coverage is included. On your auto insurance policy, look to see if it pays “full replacement cost” or “fully financed amount.” If you’re in doubt, check with your insurance agent.

You should look into buying GAP coverage as soon after you buy the car as possible and you can expect to pay about $300 to $400 for coverage that will last for the life of the car loan. Your agent may be able to arrange coverage for you, either through a rider on your current policy or through another insurance company.

Tips: Don’t believe a dealer who tells you that GAP coverage must be bought when you buy the car and don’t buy coverage without checking your primary automobile policy first.

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Victor J. Dzau, MD, gives expert advice
Victor J. Dzau, MD, gives expert advice