Gap Insurance
Gap Insurance
You have dreamt of buying that shiny new car? Well before you breathe in that new car, you will want to check into gap insurance coverage for your dream car. The intention of insurance is to protect your money and yourself, and gap insurance is an important part of it.
You can get fooled by terms like Full-Coverage and Collision insurance but they will cover most of your costs in case of an accident, but will not cover the total loss of a new car.
When a new car is driven, it immediately depreciates in value by 20 to 30 percent. So, by the time you get your car home, the market value of your brand new, shiny car worth $20,000 purchase is now worth $4000 to $6000 less than just a few hours ago.
Why this value is so important? Comprehensive and collision coverage covers only the market value of your car. This means that if you run into an accident within the first couple of months where your car is considered "totaled," then you could be liable for paying the difference between the market value and what you still owe.
Gap insurance takes care of that depreciation value for you and covers the difference between the loan amount and the market value of your car. It will mainly cover accidents and thefts. But all auto insurance policies are not the same, so you will want to look into the coverage closely.
Gap insurance is usually reserved for new automobiles so if you want to purchase gap insurance for your older car, your insurance company may not provide it. Most of the insurance companies do not offer gap insurance for older auto but there may be some that offer Gap insurance for your older auto.
Many financing companies necessarily will not tell you about the need for Gap insurance. When getting financed it is not a required coverage. Most lending companies will want you to have full coverage, but not Gap insurance. So you would be stuck paying the depreciation difference.
On the other hand, Gap insurance is usually built in leases. Lenders and dealerships will usually protect themselves. Read your lease because each one varies, and make sure that you don’t have to pay added fees if something happens to the new vehicle.
In order to obtain Gap insurance you need to contact your automobile insurance provider to see if they offer this type of coverage and how much it would cost. This will lead to increasing your premium, but in the long run it will help you save thousands of dollars.
If your insurance does not offer Gap insurance coverage? Many dealerships do offer Gap insurance so there are other alternatives. They will usually do so at a very high premium. So a better option is to look into obtaining a policy of another insurance company that offers Gap insurance.
You need to keep Gap insurance as long as the depreciation difference is significant so you don't have to keep Gap insurance forever. You can opt out of this coverage once you feel comfortable because once you have your car paid off, there is no gap between what you owe and what the car is worth.
Buying your dream car is. You shouldn't have any other worries with gap insurance which will provide you with peace of mind so that you can have fun with your new car.
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