If you live on the road or take frequent road trips, do you know how guaranteed auto protection (GAP insurance) can benefit you? It’s really for anyone, not just frequent travelers, but we’re going to look at the specific ways that GAP insurance coverage can be an excellent fit for those on the road.
First, we’ll explain what GAP insurance is and what it covers. We’ll answer questions like, does GAP insurance cover death? And does GAP insurance coverage liability?
Then we’ll discuss how it can be the perfect fit for nomads, and finally, and most importantly, how you can get it for the best price.
What is GAP insurance?
When most people purchase a new vehicle, they take a loan to do so. There’s usually a period during the first couple of years of ownership where the vehicle owner owes more for their vehicle than it’s worth.
That phenomenon is due to depreciation. The moment you drive your vehicle off the lot, it loses value. In fact, some estimates indicate that a new car loses 10% of its value as soon as you drive it home.
And your vehicle could continue to lose another 15% of its value each year that you own it. The problem with that is that unless you made a down payment of over 15%, you’ll owe more for your vehicle than it’s worth the moment you drive away.
If you’re on the road a lot, those extra miles may significantly lower the value of your vehicle, which will make GAP insurance coverage even more beneficial for you.
If you wreck your car and it’s a total loss, your insurance company will reimburse you for the cash value of the vehicle as long as you’re carrying full coverage. And if you owe $30,000 on your vehicle loan, but your car is only worth $25,000, thanks to depreciation, your insurance company will pay you $25,000 minus your deductible.
That will leave you paying $5,000 back to your lender for a car you don’t even own anymore. Planning and budgeting for such an expense are challenging and may not be possible for you.
Covering the GAP
Interestingly, the acronym for guaranteed auto protection is GAP, and that perfectly describes the coverage. GAP insurance coverage is specifically designed to cover the GAP between what a vehicle is worth and how much you owe on it.
That way, if your car is totaled, you won’t owe your lender anything. Your primary insurance and GAP policy will cover everything you owe.
GAP insurance does not cover costs related to death or injury. It also does not pay any liability claims. It only helps a vehicle owner pay off a loan if their vehicle is totaled and they owe more than insurance determines its worth.
Why should nomads get GAP insurance?
If traveling is a big part of your life, you probably have a lot invested in it. When you’re on the road full time, your vehicle is your life. If your vehicle was damaged beyond repair and you still owe your lender after insurance has paid out, you may not be able to recover financially.
Imagine that you were pulling an RV and decided to unhook your camper and park it in the national forest to camp for the week. Then you drove your vehicle into town to get some groceries.
While you were in the store, a violent thunderstorm blew through, and lightning struck a tree, causing it to fall over directly onto your car. Thankfully, no one was hurt, but your new car was damaged beyond repair.
You had just bought the car a year ago and were making monthly payments on it. After your insurance provider paid your claim, you realized you still owed your lender $8,000.
So, instead of being able to buy a replacement vehicle, you end up stuck making payments on a loan for nothing, and you can’t buy a new car because you can’t afford another payment.
GAP coverage will make sure you don’t get into that situation. Even though totaling your vehicle is stressful and you never really end up ahead when that happens, GAP insurance coverage can ensure you don’t end up as behind as you would have without it.
GAP coverage isn’t just for vehicles with a loan; it’s also for leased cars. It works the same way with leased vehicles by covering the difference between the insurance payout and what you owe the leasing agency.
How can you get GAP insurance coverage?
There are several ways you can purchase GAP coverage. You’ll want to compare all your options to decide which is the best for your situation.
Dealership GAP Coverage
When you purchase a new vehicle, the dealership will offer you a GAP insurance policy through the dealership. It may seem convenient to get it taken care of at the same time that you do your paperwork to purchase the car. And sometimes, the best move is to buy GAP coverage from the dealer, but you should shop around before deciding.
Current Insurance GAP Coverage
Your current car insurance provider may offer GAP insurance, which is another simple way to obtain coverage. All you would need to do is contact your insurer, ask if you can add GAP insurance coverage for your new vehicle, answer the questions they ask, and you’ll have coverage.
Your insurer will probably request lender, loan, and vehicle information, so they know how much to charge you.
Stand-Alone GAP Coverage
You may be able to purchase a GAP insurance policy from another insurer. Most of the time, it makes the most sense to buy it from the dealer or your current insurer, but as long as you’re comparing quotes, you might as well see how an independent policy looks.
How can you save on insurance?
Comparing quotes is the best place to start when you’re buying any kind of car insurance coverage. Insurance companies use similar risk factors to calculate rates, but they all do slightly different calculations, so you may be able to save considerably if you switch insurance providers.
Don’t forget to ask about discounts. GAP insurance isn’t exactly like standard car insurance coverage, so the exact discount may not be available, but you should ask if you might be eligible for any discounts.
While you’re researching GAP insurance coverage, take some time to review your standard car insurance coverage so you can find more discounts or a less expensive provider that still offers excellent customer service.
If you’re on the road a lot, GAP policies can protect your future nomadic flexibility by having a GAP policy for the years that you need it. Whether you pull an RV or camp with a tent, you can sleep well at night knowing you’ve done your best to plan for your future traveling needs.
Melanie Musson writes and researches for the auto insurance comparison site, BuyAutoInsurance.com. She enjoys making insurance understandable and accessible to all and helping others understand how insurance can protect their finances and future goals.