If you buy a new car and it’s then stolen or written off, your insurance will only pay out the car’s current market value, not the amount you paid for it.
When you consider that an average car loses around 40% of its value in the first year and around 60% after three years, that means you could end up out of pocket.
Enter guaranteed asset protection (GAP) insurance; it covers the shortfall between what you paid for the car and the amount your insurer will pay out should it be written off.
GAP insurance is generally sold for cars up to 10 years old, and cover is available for one, two or three years. Although it can be purchased for both new and used cars, in general it is more useful for cars up to three years old, because this is when they lose value quickest.
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