Georgia Gap Insurance: What Is It, and How Does It Work?
If you have auto insurance on your recently purchased new or late-model vehicle, you’re golden — right? You’ve done the responsible thing. Your insurer will cut you a check if your car gets totaled in an accident, stolen and never recovered, or even swept away in floodwaters.
What could possibly go wrong?
Plenty, as it turns out. Your insurer might send your lender a check for what your vehicle is currently worth. That’s known as the actual cash value, but that might be a few thousand dollars less than what you still owe. Your lender thanks you for your insurer’s check, then reminds you that you still owe them $4,000.
What’s up with that? Can you actually owe your lender money for a car you no longer own, even after your insurer has paid it off?
Yep. Easily. Here’s how it works and why you might need a very affordable Georgia gap insurance policy when your car is new, and you still owe quite a bit.
What Is Georgia Gap Insurance?
Gap is a catchier and somewhat less fancy way of saying “guaranteed asset protection.” Your asset, in this case, is your car. And what’s really being protected here is your pocketbook. This coverage is an important way of saving you potentially big money when something called deprecation slaps you in the face like a spicy barbecue sauce.
Depreciation is not your friend when you’re a car buyer. It means certain items (cars!) lose their value quickly. Your shiny new vehicle is worth $30,000 on the car dealership lot. But when the stickers come off, and you drive it out of there, it’s now a used car and probably worth a fair amount less.
If your new car were to run into the side of a bus as you proudly drive it out of that lot, your insurer would pay your lender what the Blue Book or other appraisal guides say your “used” car is worth. That is probably be a big chunk less than what you still owe for it.
Gap insurance covers the “gap” between what you owe your lender and your vehicle’s actual cash value. If you’re unsure what type of car insurance you need and you have a brand-new vehicle, you’ll want to consider a gap policy. It’s inexpensive coverage you only need until you whittle down the amount of money you owe your lender.
The Ins and Outs of Gap Insurance
That earlier scenario, with the bus broadsiding your new car as it comes out of the dealership, probably isn’t too likely. But you could have that ride one to three years before your car payments bring what you still owe in line with what your car is currently worth. What can happen in that time?
Lots of things. It could be stolen, totaled in an accident, or damaged beyond repair by a natural disaster. That’s why auto insurance is important.
If your car is badly damaged, your insurer might decide it’s cheaper to call it a total loss and pay it off rather than spend tens of thousands of dollars to repair your vehicle. For that matter, there might not be a vehicle to even try to fix. Think about a stolen ride that’s never found or one that gets swept away by hurricane winds or destroyed in a fire.
When you add gap insurance coverage to your existing auto insurance policy, your insurer will pay this critical difference and leave your finances secure.
Delving Into the Purchase Process
That’s the easy part. Simply ask your agent about gap insurance. Let your agent run the numbers and see if the coverage is the right strategy for you, based on your car’s purchase price, rate of depreciation, and other factors.
Your agent will also be able to tell you to carry gap coverage until your vehicle’s accrued cash value catches up with what you owe your lender. At that time, you can drop your gap coverage because the financial risk is no longer there.
Gap insurance is quite affordable. You might pay as little as a few dollars a month — and it’s worth every penny.
But be forewarned, while you could pay for gap insurance through your dealer, you might be charged much more than if you buy from an insurer. The dealer will write the cost into your monthly car payments, so it will seem minimal when you’re actually paying a lot more over time.
Gauging Gap Insurance’s Value to You
Your car still had that new-car smell. It didn’t even need its first oil change yet. And now it’s gone. You’re on foot, wondering if you can get a ride to work from friends or find a bus line that works for you (wondering if you still have a job, for that matter).
As bad as that sounds, it could be worse. On top of trying your best to stay employed with no wheels, you could get hit with a final bill of a few thousand dollars from your car loan company even after your insurer pays off the total loss of your damaged-beyond-repair ride.
That’s why gap insurance is so critical in situations where the actual cash value of your car hasn’t caught up yet with what you owe. Don’t take the chance of being without a ride and getting billed maybe thousands of dollars for a car you no longer own. Not when gap insurance is so cheap and easy to add to your existing coverage.
Your coverage might become even cheaper if you bundle your auto insurance with your renters or homeowners policy. Ask your agent for details.
Dealing With Gap Insurance Claims
Making a gap claim is just as easy as making any auto insurance claim. The process is the same. Just call your agent and explain what happened to your vehicle. Just as with any claim, you’ll want to include the police report. You should also take photos of the damaged vehicle.
Your insurer will appraise the damage and, if it decides to total your vehicle, will put your gap policy add-on into play. It’s that easy when you get your gap coverage through your auto insurer.
Get Coverage for Your Gap
Let Velox Insurance help you answer the question of, “Do I need gap insurance?” We encourage you to. Our independent auto insurance agents can tell you when gap insurance is appropriate and help you find the most affordable way to purchase it in Georgia.
Just reach out and contact us at (855) GO-VELOX. You can also go online for a quick cost quote for auto insurance or find a Georgia location near your city or town. Schedule a personal meet-up with a friendly and knowledgeable Velox Insurance agent.
