Along with your regular automobile insurance, you should consider purchasing guaranteed auto protection (GAP) insurance for your leased car. GAP insurance pays the difference between what you owe on your lease or auto loan and what your insurance pays if your vehicle is damaged beyond repair (totaled) or stolen.
Why Is this Important?
If your vehicle is totaled or stolen, your auto insurance policy will pay only the actual cash value (ACV) of your vehicle. That’s the depreciated value of your car. The ACV may be substantially less than what you owe on your loan or lease. You must make up the difference out of pocket unless you have GAP insurance.
GAP insurance can provide valuable protection during the early years of your car, when it depreciates the fastest. GAP insurance may also be required by some lenders or lessors. However, once the outstanding balance on your lease or loan drops below the value of your car, you’ll no longer need GAP coverage. At that point, you should cancel your GAP policy.
The cost of GAP insurance will vary from one insurer to another, so it pays to shop around. The cost will also depend on the type of car you buy or lease, and its value.
If you have questions, contact the Insurance Experts at Henssler Financial: 770-429-9166 or experts@henssler.com.
Disclosures:
The following information is reprinted with permission from Forefield, a division of Broadridge Financial Solutions, Inc. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.
