Of personal assets with the most rapid depreciation rates, cars, trucks and other vehicles rank among the highest.
Auto industry experts estimate most vehicles depreciate in value by an average of 20% in the first year of ownership. According to a recent study by iSeeCars, the average depreciation of a vehicle over five years is 40.1%.
Standard auto insurance policies will cover the current market value of vehicles at the time of a claim. However, there may be instances where a purchaser puts down a small down payment during initial financing, and in the early years of ownership, the outstanding balance of the loan exceeds the value of the vehicle at the time of a claim.
Gap insurance (Guaranteed Asset Protection insurance) is an optional add-on for standard auto liability policies, covering the difference between the market value of the vehicle and the remaining balance of the loan in the event a vehicle is totaled. The Insurance Information Institute estimates gap insurance, with collision and comprehensive coverage, adds about $20 to a policyholder’s annual premium, offering peace of mind for a nominal fee.
Purchasers of new vehicles should consider gap insurance if they have:
- Financed for 60 months or longer
- Applied less than a 20% down payment
- Leased the vehicle
- Purchased a vehicle that rapidly depreciates
- Rolled over negative equity from an old vehicle loan, adding to the total balance of the new loan
Speak with a Leliaert Insurance Agency staff member today to help you determine the best fit for your coverage needs.