There is no doubt about the goodness of GAP
insurance. Having one always helps. But there is a cost that you have to pay
for buying GAP insurance and keep in mind; it is not so small a sum that you
can easily ignore. Considering the coverage and benefit, it is always worth to
take the policy as you are assured of complete protection from financial losses
in the event of accidents that can result in extensive damage and the insurer writes off the vehicle.
Whether or not to take the policy would depend on the situation that you are
facing. There is no one word answer to it. If you know the reasons why
financial gaps are created and are also aware about the fast depreciation rates
of cars, it would be easy for you to judge the situations that you might face
and take the most appropriate decision. Let us try to gauge the risk factors
one by one.
GAP insurance is a product that has been
based on an asset acquiring negative equity. Vehicles are most vulnerable to
negative equity as it undergoes high rate of depreciation, losing almost a
fifth of its value as soon as it hits the road from the showroom. As accidents can happen at any moment, and
vehicles keep losing its value with each passing day, the easiest solution is
to get GAP protection cover to take care of all uncertainties. This would
ensure that you are never hurt financially when accidents happen.
When GAP insurance is needed
· If the car that you purchase
has a very high rate of depreciation, it will acquire negative equity very
· The down payment amount was too
little that compelled you to take higher amount of loan.
· The repayment tenure of loan is
· The monthly repayment amount is
· The loan has been structured in
such a way that you are left to pay a big sum as onetime payment at the end.
· For leased vehicles, it is
almost compulsory to have GAP insurance.
When it is not needed
Since you have a comprehensive car insurance policy have a good look at it before deciding to buy GAP insurance. Often, there is a clause in comprehensive car
insurance policy, especially if the vehicle is registered in your name for the
first time and you are the first owner of the vehicle, that the car will be
replaced if damaged within a period of 12 months. But there are exclusions
applied if the car is stolen or the accident happens due to the fault of the
insured person or owner.
You can avoid taking
guaranteed asset protection if you enter into a financial arrangement that
takes care of the gap that arises between the cost that you paid for buying the
vehicle and the written down value or book price.
Considering all the aspects that have been
discussed, you must be better placed to decide whether you need GAP insurance