Immediately after the purchase of a vehicle, the value tends to decline sharply, and if this car was purchased through a loan, this will mean that the amount that the purchaser owes the lender is actually more than the value of the vehicle. In the unfortunate case that something happens to the vehicle at this time, the buyer will owe the lender thousands, and this can be discouraging to car owners. It is for this reason that in the 1980s, GAP or Guaranteed Auto Protection was established in order to cushion car owners from such eventualities. GAP insurance is one of the California car insurance coverage available for vehicle owners within the state of California.
Normal car insurance in California usually considers the cash value of your vehicle, and in case of an accident, the claim will be awarded on the current value of the damaged vehicle. However, if the value is lower than the price that you purchased the car for using a loan, then you will have a huge problem on your hands as you will not be able to pay the difference, and this difference can be huge. GAP California car insurance will help you by paying the difference that results from the balance on your loan after the current value is subtracted from it.
GAP insurance takes into account the fact that a vehicle depreciates very fast after it is purchased. On average, the depreciation rate of a car is thirty per cent within the first month of driving it, meaning that in case something happens to it, you will be paid seventy per cent of the original retail price of the vehicle. Within three months, most car owners are usually stuck in the upside down phase meaning that the money that they owe on the loan that purchased the car is more than the value of the car.
It is naïve to assume that payments will be made on the retail value as California car insurance companies will always do their math’s and they will determine the value of the car, which will definitely be less than what you purchased it for.
It is important to note that California car insurance only covers the gap that is reached at after the insurance company, which covers your comprehensive insurance as well as collision insurance, has paid up. Therefore, you must still have an insurance cover for the other details such as collision as GAP car insurance in California will not help you to pay for anything else.
It is also important to note that GAP car insurance in California is only offered to individuals who received their loan from recognized financial institutions, and not from an individual private lender. In addition, if you purchased your vehicle in cash, then there is definitely no need to have a GAP insurance coverage.
GAP insurance is very beneficial for new car owners who purchased their vehicle through a loan, especially during the upside-down period while they still owe the lender so much money, and it is advisable that anyone who meets these specifications should take GAP insurance in order to be cushioned in the case of an accident during these first months.
