Gap insurance, also known as guaranteed asset protection, addresses the difference between the amount owed on a car loan and the car's actual cash value in the event of a total loss. This type of insurance becomes particularly relevant when the value of a new vehicle depreciates faster than the loan balance decreases.
A standard auto insurance payout may not cover the remaining loan balance if the insured vehicle is stolen or totaled in an accident. Gap insurance can help cover the shortfall between the car's depreciated value and the outstanding loan amount.
Who Needs Gap Insurance? 
Gap insurance is not necessary for every car owner, but it can benefit specific individuals. Those who have financed a new or nearly new vehicle with a small down payment or a long-term loan may find gap insurance particularly useful.
The initial depreciation of a new car can be steep, leaving a significant gap between the loan balance and the car's market value. Additionally, individuals who lease their vehicles may be required to purchase gap insurance according to their lease agreements, as leasing companies recognize the potential financial risk of depreciation.
Another group that might consider gap insurance includes those who drive high-mileage vehicles. High mileage can accelerate depreciation, increasing the likelihood of a gap between the loan balance and the car's value.
Learn More
Contact Dixon Blackwood Insurance Agency, Inc. for more information about gap insurance. Our team can help tailor auto insurance coverage and compare multiple quotes.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.