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If you’re involved in an accident and your car is totaled, you may find yourself owing more on the car than the insurance company is willing to pay for your claim. This isn’t an ideal situation to be in, but GAP car insurance coverage from State Farm can help. With GAP car insurance from State Farm, prices may make it almost too good not to add.
Protecting your investment. and your pocketbook
GAP is an acronym that stands for Guaranteed Auto Protection (or in another context, Guaranteed Asset Protection). With GAP car insurance coverage, State Farm prices are affordable for most drivers. This insurance provides a bridge between what you may still owe and what State Farm is willing to pay if your vehicle is involved in an accident and the repair costs are deemed to be more than what the vehicle is worth (requiring you to file a totaled car claim .) The amount represented by that figure is what’s referred to as the vehicle’s actual cash value. or ACV. Any insurance adjuster assigned to your claim is going to fix a market value to your car based on a range of factors including the number of miles on the car, the re-sale value of the car, the make and model and its age.
Crucial coverage at a crucial time
GAP car insurance coverage from State Farm is valuable during the first few years of car ownership when you are financing the purchase of your car. It is also valuable if you are leasing your car. Here’s an example:
Assume that you own a car that you owe $25,000 on when you drive it off the lot. Before you’ve owned the car for an entire year, you’re involved in an accident. The car is totaled. The ACV on the car is determined to be only $21,000, although by that time you still owe $23,000 on the car. In this instance, your car insurance company will cut a check to your bank for $21,000 (possibly less if you have a deductible that comes into play.) The $21,000 is the ACV of the car once depreciation has been applied in this scenario. This leaves you holding the proverbial bag to the tune of $2,000. If you have GAP insurance, your policy will pay the remaining $2,000, leaving you owing nothing.
It’s a fact of life, cars lose value
According to the Insurance Research Council (IRC) and the National Automobile Dealers Association (NADA) most cars lose upwards of 30 percent of their book or retail sales value during the first 18 months of ownership. GAP car insurance through State Farm can be a hedge against that rapid depreciation. It can also be particularly useful if you’ve taken the negative equity from one auto loan and applied it to your new auto loan, or if you’ve not made a substantial down payment on your new car. Both situations can cause your repayment period to be longer, and thus, the depreciation significant in comparison to the balance that remains on your auto loan in the event of a total loss through an accident or a theft where the car is never recovered.
Is it worth it?
While the rates you will pay to add GAP car insurance coverage to your State Farm auto policy will vary from state to state and from policy to policy, it tends to be a mid-range add-on that could save you tons down the road. A brief online reveiw shows that GAP car insurance coverage State Farm prices can run as low as $15 in additional premium added to the term of your full-coverage policy.
You can easily determine if this coverage is of value to you by comparing the additional premium you will pay for adding GAP coverage to the the payout schedule for any car loan you may have or the amortization schedule from your lease agreement if you’re currently leasing a car. (If you don’t already have these documents, ask for a schedule from your lender or leasing agent.) Rememer, too, that you don’t have to maintain GAP car insurance coverage for the entire life of your car — just that period where it’s cost-effective for you.
As a car owner and responsible driver, you have a broad range of coverage options to consider when putting together a car insurance coverage plan. Getting some practical advice from an experienced car insurance agenrt is a great way to have your questions answered and to review competitve rates and proposals. Reply! can put you in touch with insurance professionals near you who will be able to show you if GAP car insurance from State Farm is a smart addition for your coverage needs.
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An Independent Insurance Broker and car enthusiast. I love my dogs, Top Gear and my Range Rover. To share her ideas, find her on Google+ .