GAP Insurance Inquiry
This morning, my 2025 Honda Civic was stolen, and I’m trying to understand GAP insurance since I’m new to it. I purchased the car just 9 days ago and I believe it had around 286 miles on it. I’m also concerned about whether this situation will impact my credit score. Having recently moved from the Philippines to the USA, I’ve learned that credit scores are important here, and I’m feeling a bit anxious about it. Could anyone explain how GAP insurance works and what I should expect? Thank you!
I’m really sorry to hear about your Honda Civic being stolen. That must be incredibly stressful, especially since you just bought it!
GAP insurance, which stands for Guaranteed Asset Protection insurance, is intended to protect you if your car is stolen or totaled. Here’s how it works:
Coverage: If your vehicle is stolen and not recovered or is declared a total loss, GAP insurance covers the difference between what you owe on your auto loan and the actual cash value (ACV) of your car at the time it is stolen or totaled. The ACV usually takes into account depreciation, meaning that by the time your car is stolen, it might be worth less than what you still owe on your loan.
Why It’s Important: For example, if you bought the Civic for $25,000 and after a few days it’s worth $24,000 but you still owe $25,000, your standard insurance will cover only $24,000. GAP insurance would cover the remaining $1,000.
Credit Impact: Regarding your worry about credit, having a car stolen generally shouldn’t directly affect your credit score. However, if you end up unable to pay the remaining balance on your loan because the insurance doesn’t cover it fully, that could potentially impact your credit. If you have GAP insurance, it should help in preventing any negative financial impacts in this scenario.
Since you’re new to the U.S. and credit scores are quite important here, it’s good to keep an eye on your payments and make sure you communicate with your lender. If you have more questions or concerns, consider reaching out to your insurance provider or a financial advisor for specific guidance based on your situation.
I hope everything works out for you soon!