As a result of depreciation during the first few years that you own
your vehicle, RV, boat, or motorcycle, the value may be lower than the amount
owed on the loan. As your vehicle, RV, boat, or motorcycle's value declines,
your loan balance can be significantly higher, leaving a gap between the value
and the amount you still owe.
If your vehicle, RV, boat, or motorcycle were stolen or totaled in an accident, you may assume the insurance you have is sufficient to cover the losses. However, when
it is declared a total loss, your insurance settlement will generally pay the market value less the insurance deductible. This amount may be substantially less than the balance due on the loan. You would then be liable to pay the difference between your insurance settlement and your outstanding loan balance. This is where GAP steps in.
GAP covers the deficiency balance between the market value of your
vehicle, RV, boat, or motorcycle plus the insurance deductible (up to $1,000) and the loan balance you still owe. By having GAP, you avoid having to pay
the out-of-pocket expenses on the remainder of your loan balance if
it were to be stolen or totaled.
GAP is a flat amount that may be amortized over the life of the loan and figured directly in with your GECU loan payment.
