Gap insurance, or Guaranteed Asset Protection insurance, is a valuable add-on to your auto insurance policy designed to cover the difference between your vehicle’s actual cash value (ACV) and the outstanding balance on your auto loan or lease. This type of insurance becomes crucial if your car is totaled or stolen around Buena Vista, VA. Gap insurance is generally affordable and can be purchased through your auto insurance provider or car dealership.

How Gap Insurance Functions

When you purchase or lease a vehicle, it depreciates in value as soon as you drive it off the lot. This depreciation can outpace your loan or lease balance reduction, especially in the early years. In the event of a total loss, standard auto insurance typically pays out based on the vehicle’s current market value, not the amount you owe. You are responsible for covering the difference if this payout is less than what you owe. Gap insurance covers this "gap," ensuring you are not left with an unexpected financial burden.

For instance, if your car’s ACV is $18,000, but you still owe $22,000 on your loan, gap insurance would cover the $4,000 difference between these amounts.

Benefits of Gap Insurance

The main advantage of gap insurance is the financial protection it provides. Without it, you could face significant out-of-pocket expenses if your vehicle is declared a total loss. This type of insurance is particularly useful for those who have made a small down payment or who have financed a new car, as the depreciation during the initial period can be substantial.

Stonewall Grace Insurance For Better Understanding of Insurance

Stonewall Grace Insurance offers all of the information you need to get insurance. Our agency serves the locations in and near Buena Vista, VA. Call today.