Would your insurance pay off your auto loan if your vehicle
was totaled or stolen?
If not, or you're simply not sure. Guaranteed Asset
Protection coverage, also known as GAP, might be right for you.
GAP insurance is supplemental coverage that picks up where
standard auto insurance leaves off. So,
if your car is totaled in an accident or stolen and your
insurance policy doesn't cover enough to pay off the balance
of your loan, GAP insurance will cover the difference.
It takes care of the
'"gap" between what you owe on the car and what it's worth.
Let's say you have twenty five thousand dollars left on your
auto loan when you get in a wreck.
After your insurance company checks out the damage,
they declare your car a total loss and determine its cash
value is twenty thousand dollars.
They subtract your five hundred dollar deductible from that
number and then cut you a check for nineteen thousand five hundred dollars.
That leaves you responsible for the five thousand five hundred
dollar difference between what you still owe on the loan and
your insurance payout.
With GAAP insurance,
five thousand dollars of that would covered.
Cars depreciate as soon as you drive them off the dealer's lot.
That means the actual cash value or ACV of your vehicle
could be less than the amount you owe on it.
If your car is totaled or stolen,
your insurance company will give you its actual cash value,
but that may not be enough to pay off your loan.
Gap insurance covers what you would have lost through depreciation.
Most GAP insurance policies don't pay towards your
insurance deductible.
That means you could still be short some amount towards
paying off your lost car.
But PenFed member qualify for the Gap Advantage,
an additional one thousand dollars towards replacing your
vehicle when you finance through PenFed.
Gap insurance isn't for everyone in every situation.
Determine how much risk you're comfortable with to decide if
it's right for you.