Securing your assets is particularly important if you’re talking about a car as often they are one of the most high cost possessions we are likely to own. Protecting your assets means protecting your wealth. Asset protection, particularly when it comes to your car, can be an important part of securing its long term value and could save you money in the long term. It’s unfortunate that when you buy yourself a new car, its value drops by a third as soon as you drive it from the car dealership, approximately 40% in the first year and 60% over the next three years. If your car is written off or stolen, your insurer will pay you out its worth at the time of it being taken away and the amount is likely to be far less than what you paid for it, even if it was brand new. The ‘gap’ between the amount your insurer pays you and the amount you originally paid is often lost and this is where GAP protection can come in handy.
What is GAP insurance?
GAP (Guaranteed Asset Protection) insurance is used to cover the difference between the amount you paid for your car and the amount of the insurance company would give you if it was stolen or written off.
Is GAP insurance worth the cost?
If you aren’t bothered about your cars depreciation in value then GAP insurance may not be something you should invest in. If, however, you are worried that you won’t be receiving the best possible price for your vehicle should it be written off, then it’s definitely worth considering protecting your car with GAP insurance.
Is GAP insurance just for new cars?
You can buy GAP insurance regardless of the age of your car, be it new or older. It is, however, more useful for newer cars. This is because new cars depreciate at a faster rate. As the value of the car will already be slower with a used car and the rate of depreciation has slowed down, the gap it covers between the price you paid and what your insurer is likely to pay out is a lot less, which makes it less useful for a used car than a newer one.
Is GAP insurance a good option if I owe money to a finance company?
If you have taken out finance or a personal loan to buy a car, you may find that GAP finance might be very useful. This is due to the fact that if you’ve bought a car and its written off or stolen, although your car insurer will pay off the value its worth at the time, you will still be left paying off the value it was when you first bought it. If you crash the car or not, you will still have to pay back the loan. If you have GAP cover, the loan would be paid off earlier so you won’t be left paying back the money for a car you no longer have.
