If you’re planning to purchase a late-model, low-mileage pre-owned vehicle, then you should definitely consider whether adding Guaranteed Asset Protection (GAP) coverage makes sense for you. GAP insurance can be offered through your bank, insurance company, or the dealership you’re buying from, and that includes vehicles purchased through CarMax.
CarMax is the largest used car seller in the United States, so it’s no surprise that its dealers offer in-house GAP insurance coverage. CarMax GAP insurance helps protect you in the event of an accident, theft, or natural disaster, and you can only get this coverage when using CarMax’s financing. Learn everything you need to know about CarMax GAP insurance and discover whether or not it’s what your car needs.
GAP Insurance Basics
The first thing to understand about GAP insurance is exactly what it covers. The ultimate purpose of GAP insurance is to provide coverage for your car payments if your vehicle is totaled or stolen before you’ve paid it off. A car only loses value over time, so you’re already likely to be paying more on it than it’s actually worth. If the vehicle is involved in a serious accident or it’s been stolen and you don’t have GAP insurance, then you are responsible for paying off the loan above and beyond what the insurance company’s payoff is.
With GAP insurance, the insurance provider will pay off the rest of the loan should the car become a total loss. What’s left on your loan will be covered by the GAP policy. The actual value of this will, of course, depend on how much you have left to pay on your car, and considering the low prices of some CarMax cars, GAP insurance may not always be the smart choice.
What GAP Insurance Covers
CarMax GAP insurance covers a variety of causes that can make your vehicle a total loss. This includes damage from a fire, serious accidents, and inclement weather like hurricanes, tornadoes, and flooding. Importantly, this insurance also covers instances of theft. If your car is a total loss due to any of these causes, the GAP insurance will cover the rest of your loan payoff.
While this insurance covers a wide variety of causes for a total loss, there are some aspects of a total loss that GAP insurance notably does not cover. This includes any repairs to your vehicle if you’re looking to save it, as well as any extended warranties for car loans. If your vehicle is in the shop, this insurance doesn’t cover rental cars. Additionally, missing payments due to any kind of financial hardship, disability, or loss of employment aren’t covered either.
How GAP Insurance Works
To get CarMax GAP insurance, there are a few things you need to do first. The first is that you have to buy a vehicle from CarMax. This specialty insurance is only available from them and them alone, and they only offer it to their own customers. Secondly, you must finance your purchase with CarMax as well. Despite this, CarMax itself doesn’t actually manage your insurance coverage, as that task is outsourced to a company called Safe-Guard Products International.
There are a few limitations that come with purchasing this type of insurance. You must buy it within a week of financing your CarMax vehicle. You might see reports of sales reps claiming 90 days as a limitation, but the hard limit in fine print is seven days. Make sure you meet the seven-day limit if you’re interested in coverage. It’s typically easier to opt in the same day you finance your vehicle. Just keep in mind that CarMax GAP insurance is not the same thing as MaxCare.
When you buy GAP insurance, the bill comes once a year. That means you need to pay for a year’s worth of coverage upfront. Fortunately, that price is typically fairly low, about $30 depending on your financing details. The premium will be owed every subsequent year until your vehicle financing is complete.
After Purchasing GAP Insurance
Once you’ve purchased GAP insurance, you are officially covered for a variety of total loss events. After your purchase, your vehicle is put into the Safe-Guard registry using its vehicle identification number (VIN), provided that you also have comprehensive and/or collision insurance depending on your local requirements. If you ever need to file a claim, you can do so through Safe-Guard online where they’ll ask for your VIN in addition to the standard information about you and your vehicle.
Remember that if you ever need to make a claim or even have questions, you’ll need to talk to Safe-Guard. CarMax sales reps don’t really have anything to do with gap insurance, so they’ll likely just direct you to Safe-Guard without offering any answers themselves.
GAP Insurance Cost
The cost of GAP insurance is generally about $30 per year, but the impact of that number depends on how you financed your vehicle. If you put more money down upfront, your monthly payments are going to be lower, along with your interest rates. If you didn’t put that much down upfront or didn’t put anything down, high-interest loans are common. These are where you’ll really benefit from gap insurance, as the cost will effectively pay for itself should anything happen that creates a total loss on your vehicle.
Should You Get CarMax GAP Insurance?
Given that GAP insurance is generally fairly affordable, there aren’t that many downsides to it. Affordable is a relative term, however, so it’s always important to consider your budget and finances first. If you buy a car that’s especially cheap, for example, you may find that the cost of GAP insurance isn’t really worth the risk of simply paying off the rest of your loan, even with a total loss. For more expensive vehicles, however, GAP insurance is close to a necessity if you want to walk away from a serious accident without a financial burden on your hands.
Ultimately, you will reach a point where you’ll owe less on your vehicle than the vehicle is worth. In those cases, GAP insurance doesn’t have anything to offer, and you may not even be able to get a refund for the year’s GAP insurance payment. Every situation is different, however, so you’ll need to weigh the advantages and disadvantages yourself.
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