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Gap Insurance

Gap insurance, also known as Guaranteed Asset Protection insurance, is a type of insurance coverage that protects you in the event of a total loss of your trailer or vehicle.  Here's an explanation of gap insurance and how it works:

finance thumb 1When you purchase a trailer or vehicle, its value typically starts to depreciate immediately. If your vehicle is financed, there can be a gap between the amount you owe on the loan and the actual cash value (ACV) of the vehicle at any given time. The ACV is the market value of the vehicle considering its age, mileage, and condition.

In the event of an accident, theft, or other incident resulting in a total loss of your vehicle, your insurance company will generally pay you the ACV of the vehicle. However, if the ACV is less than the outstanding balance on your loan, you will be left with a deficit or "gap" that you would be responsible for paying out of pocket.

This is where gap insurance comes in. Gap insurance covers the difference between the ACV of your vehicle and the remaining balance on your loan. In other words, it helps bridge the gap, ensuring that you are not left financially responsible for the remaining loan balance after your primary insurance payout.

Gap insurance is like a safety net for your trailer loan. If your trailer gets damaged or stolen and you owe more money on the loan than the trailer is worth, gap insurance helps pay the difference, so you don't have to. It helps protect you from being stuck with a big debt if something bad happens to your trailer.

Gap insurance is like having extra protection to help you if there's a gap between what you owe and what your trailer or vehicle is worth.

Here are some key points to understand about gap insurance:

  • Coverage Duration

    Gap insurance is typically purchased as an optional add-on when financing a vehicle. The coverage duration is usually aligned with the length of your loan or lease term.

  • Cost and Payment

    The cost of gap insurance can vary depending on factors such as the vehicle's value, loan amount, and the insurer. It can be a one-time premium paid upfront or added to your monthly loan payments.

  • Eligibility and Requirements

    Gap insurance requirements may vary by lender and insurance provider. Some lenders may require gap insurance as a condition of financing, while others may not. Our finance experts at Leonard Truck and Trailer will check with your lender and explore different insurance providers to find the best coverage option for your needs.

  • Limitations and Exclusions

    Gap insurance typically covers only the difference between the ACV and the loan balance. It may not cover other expenses such as late fees, extended warranties, or any outstanding penalties. Additionally, there may be limitations on the maximum coverage amount and exclusions for certain types of losses or damages.

  • Primary Insurance Requirement

    Gap insurance is usually secondary coverage, meaning it comes into play after your primary auto insurance pays out. You must maintain comprehensive and collision coverage on your primary insurance policy for gap insurance to be effective.

Gap insurance can provide valuable financial protection and peace of mind, especially if you have a high loan balance or if the vehicle depreciates quickly.