What is GAP Insurance on cars? Obvi has put together a handy guide to fully explain everything.
GAP Insurance definition: Guaranteed Auto (or Asset) Protection is a type of car insurance which protects your finances when a loan is taken out to pay for your car.
But what does GAP Insurance on cars really mean?
Take this scenario; you were involved in an accident and you totaled your car. Your insurance company determines that the car is worth $14,000. This is less than you imagined but you bought the car new so it depreciated in value over time. You still owe $18,000 because you took out a long term loan over 7 years, meaning
$18,000 – $14,000 = $4,000
What you owe – car worth = Amount you still owe
GAP Insurance protects you and will cover this $4,000 – this is the “GAP”. Obvi protects you when you take out a loan to finance your car with GAP Insurance.
What do I need to know?
- GAP Insurance on cars is not just available if you purchased your vehicle, it also includes leased vehicles.
- Traditionally, GAP Insurance was only sold through the dealer when purchasing a vehicle. However, this was expensive, the dealer was often not knowledgeable about the product and they were not the ones who would handle your claim.
- Obvi has completely changed GAP Insurance on cars; by bringing the sales process online and cutting out the middleman, consumers can save up to 70%, there is no sales pressure and confusing technical jargon and consumers get a better product.
Why do I need it?
Both leasing a car and taking out a long-term loan are popular options in Canada. According to Automotive News Canada, around 25% of new cars are leased and CBC News reported that in 2018, 55 % of all new car loans were for at least 84 months (7 years). Unfortunately, people forget that leasing and having a loan over a long number of years does come with risks. Here are some points to think about;
- “I’m a sensible driver, I’m not going to crash my car…” Hopefully you won’t ever be in an accident, but what if it is stolen? Or there is a fire? Not everything is always in our control, so if you have a long term loan, you want to have reassurance that you will be financially covered in case something happens.
- The worst case; you don’t want to be left with a loan and no car- this can happen, and that’s why you need protection.
GAP Insurance on cars is there to help protect your finances and give you peace of mind. We sometimes forget the financial risks and ties that are associated with our vehicles, and we also often forget that some events are outside our control such as theft or accidents. With Obvi you can purchase GAP Insurance online. Find out more about GAP coverage and get a free quote now.