Florida Auto "GAP" Insurance:

GAP or Guaranteed Auto Protection insurance is an optional type of insurance policy that offers protection against financial liability for people who have bought a vehicle on loan and the actual cash value (ACV) or the market value of the vehicle is less than the amount owed on the loan.

Based on the auto insurance policy, GAP insurance normally provides coverage against thefts and accidents. However, the terms of the insurance policies vary and so, it’s better to carefully evaluate the terms and conditions of the GAP insurance policy before purchasing one.

  • How does GAP insurance works?

To get an idea of how GAP insurance works, consider the following situation:

Suppose you purchase a new vehicle on loan for $22,000. You make the down payment of $600 and agree to pay $300 as monthly installment. Now, six months later, the value of your car decreases to just $16,000. After six months, you’d have paid $2,400 (six monthly installments in addition to the down payment). You still owe 19,600 on the car. At this time, your vehicle meets an accident. In such a case, your insurance company will pay you just $16,000 and not $19,600. Now, if you don’t have a GAP insurance, the additional $3,600 would come out of your pocket.

  • Time Frame of GAP insurance policy:

Usually, a GAP insurance policy extends through the tenure of the loan. For instance, if the loan is a 10-year loan, the GAP insurance remains valid for 10 years. However, some GAP insurance policies may have a clause stating they won’t cover a loan whose tenure is of more than 84 months.

  • Cost of a GAP insurance policy:

Some factors that the auto insurance companies consider when determining the cost of the policy are the purchase price and the model of the vehicle being covered. Insurance companies usually charge around $300 to $800 for a GAP insurance policy.

It’s recommended that you obtain quotes from multiple auto insurance companies before buying a GAP insurance policy. This cost of this policy may not prove worthwhile for you if you’ve made a large down payment or have purchased a vehicle with a high resale value.

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