Ford Gap Insurance: Everything You Need To Know
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Many challenges come with vehicle ownership. If you’re unlucky, you may end up wrecking your car or getting it stolen in your first year. Although insurance may cover your vehicle in case of a total loss, there’s an instance where you owe more than your car’s current market value.
In this case, having a Ford gap insurance can be a godsend.
If you’re wondering if Ford gap insurance is right for you, you’ve come to the right place. Here’s everything you need to know before signing up for gap insurance.
Ford Gap Insurance: What is It?
Most, if not all, insurance policies will only cover the car’s depreciated value – aka the vehicle’s fair market value at the time of the claim. The Ford GAP insurance stands for “Guaranteed Asset Protection,” and it’s an optional coverage that covers any “gap” in your vehicle finances.
When your vehicle is wrecked or stolen and ruled as a total loss by insurance, the payout will reflect the car’s current market value. Unfortunately, most modern cars depreciate as much as 20-30% of their original sticker price within a year. Therefore, there’s a good chance what you owe from your lender is more than the car’s market value.
This is referred to as going “underwater” or “upside-down” on your loan – and potentially looking at a hefty bill.
Getting a Ford gap insurance ensures that the difference between the remaining loan balance and insurance payout is covered. For Ford customers, gap insurance is entirely optional and is only available during the purchase of a Ford vehicle.
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Ford Gap Insurance: What is Covered?
Unlike standard insurance, gap insurance is supplementary and optional coverage and not required by state laws. However, it’s still worth considering, especially during your first year of ownership. In total loss due to accident or theft, gap insurance makes sure you’re covered. Below is a quick breakdown of what gap insurance covers.
Ford Gap Insurance Covers:
- Vehicular accidents
- Fire
- Theft
- Acts of nature (flood, typhoons, hurricanes, etc.)
- Vandalism
Ford Gap Insurance Doesn’t Cover:
- Inability to make car payments due to job loss, financial hardship, disability, or death
- Fraud or intentional damage
- Engine problems and other mechanical issues
- Rental fees while your vehicle is in the shop
- Down payment for a new car (although some companies offer dealer credits, including Ford)
- Extended warranties added to your car loan
- Negative equity rolled over to a new car loan
This is hardly a master list of coverage. Each car manufacturer, bank, and the insurer has its spin on gap insurance coverage, so it’s best to confirm with your gap insurer.
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How Does Ford Gap Insurance Work?
The concept of gap insurance is relatively simple, and we’ll help you understand it by giving an example of how it works.
Say you purchased a new Ford F-150 truck for $30,000 with a down payment of 10%. So now your car loan cost is $27,000. Let’s say you sign up with a 5-year loan term with 0% interest (to keep it simple), so your monthly payments come down to $450. After one year of ownership and monthly payments, you reduced the loan balance to $21,600.
At this point, if you get your vehicle stolen or totaled and written off as a total loss, your insurance reimbursement will be equal to the F-150’s current marketing value. With a standard depreciation rate of 20% after one year of ownership, your F-150’s current market value would be $24,000.
As you can see, your insurance check covers the remaining loan balance, with an extra $2,400 that you may use for a new car. But what if you made a lower down payment or had a car that depreciates quickly?
Let’s assume that your F-150 lost 30% of its value during its first year. This brings its total market value to $21,000, which isn’t enough to pay off your balance of $21,600. You have a shortfall of $600, and that’s coming out of your pocket. You don’t have to worry about paying off that $600 gap with Ford gap insurance.
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Ford’s GAPCoverage and GAPAdvantage
Each car manufacturer has its own spin on gap insurance coverages. For Ford customers, the gap insurance add-on is under GAPCoverage and GAPAdvantage programs. Here are the advertised benefits of the GAPCoverage program:
- Coverage up to $125,000 or 150% of MSRP (new), or 150% of NADA value (used)
- Coverage for new and used vehicles
- Terms up to 96 months
- Up to $1,000 coverage for insurance deductible (except Alaska)
- Fully refundable up to 60 days
- Up to 12,500 lbs Gross Vehicle Weight Rating (GVWR)
What about GAPAdvantage? Both are essentially the same program, but GAPAdvantage offers extra protection by providing an additional $1,000 dealer credit towards your replacement vehicle.
Ford Gap Insurance FAQs
1. How much does it cost?
On average, the cost of gap insurance is relatively affordable. Having said that, getting Ford gap insurance may cost you $50 per year.
2. Do I still need gap insurance even when I have full coverage?
Remember, most insurance policies will only cover the current market value of your car. Full collision coverage means reimbursement for your car’s current value, which may not satisfy your remaining loan balance.
3. Can you cancel and get a refund for gap insurance?
Yes, you are free to cancel your gap coverage anytime. If you cancel your Ford gap insurance within 60 days, you’ll get a full refund.
4. Can you get gap insurance after buying a car?
GAPCoverage is only available at the time of the purchase. However, depending on the vehicle’s model year, you may be able to receive gap coverage from an auto insurance company.
5. Is it worth it to get gap insurance?
The answer depends on several factors, such as your down payment or how well your car holds its value over time. If you think you’ll go upside down on your car loan at some point, gap insurance is worth it for the added protection.
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