Gap Insurance: What Is It And Do You Need It?

Are you familiar with gap insurance coverage? Many people aren’t. However, this type of coverage can offer valuable protection on your new car if you happen to get in a wreck. When you purchase a new vehicle the value depreciates once you drive it off the lot, which makes it worth less than what you paid for it. Car insurance companies go by the value that the car is actually worth. If you take out a loan or lease for the vehicle with little or no down payment, this leaves a gap in the amount you owe the bank for the total value of the vehicle.

If you decide to lease a brand new car, you will probably need gap insurance. Most dealerships require drivers to purchase gap insurance coverage when they lease a new vehicle. This is because it ensures they will receive the total value of the vehicle in the event of an accident or theft. As new cars are more likely to be stolen than older ones, this is a great coverage plan to have.

Now that you know what gap insurance is and what it does, how do you get it? It is best to check with your insurance agency before purchasing or leasing a new vehicle. Many, but not all, insurance companies offer gap coverage with their policies. If your insurance company does not provide it, you may want to look into other companies. However, you don’t necessarily have to switch insurance companies just for this if you already have one. You can purchase gap insurance coverage through the dealership, but it comes at a much higher price.

Consider gap insurance coverage when purchasing a new vehicle. It would be very unfortunate to purchase a new car then have it totaled shortly afterwards; the insurance company only pays for the amount the car is worth and you’re left owing the bank a great deal of money. Having gap insurance coverage provides peace of mind for new car owners.