Understanding Gap Auto Insurance
What is Gap Insurance ?
Gap insurance is for drivers who have a vehicle that they are currently financing or are leasing. It’s purpose is to cover the difference between the actual cash value of your vehicle due to depreciation and what you owe on the car. Gap coverage kicks in when your vehicle is involved in a total loss in which it is either outright stolen or involved in an accident, so severe, it is not worth repairing.
For example, you are leasing a vehicle for 36 months at $550 per month and you put down $5000, your vehicle would be worth $24,500 at the time of purchase. Now 12 months go by and you have totally paid $11,600 [$6,600 (lease payments) and $5000 (down payment)] for your vehicle. Unfortunately, your car is stolen. Your insurance company deems the actual cash value of your vehicle is now worth $21,000 and gives you that amount for your stolen vehicle. However, you still owe your leasing company $12, 900. Considering you have already given them $11,600, you will have to give them another $3500 from your own pocket to make up the difference ($24,500 less $21,000). If you added Gap insurance to your coverage your insurance company would have paid the difference not you.
Who should buy Gap Insurance?
If you are currently leasing or fiancing and you have a long period of time before your vehicle is fully paid off then you may want to consider purchasing gap coverage.
How do I know my insurance company provides gap insurance?
Before deciding to purchase a new vehicle, check with your current insurance company about Gap insurance. It may already be apart of your coverage. If it is not, Gap insurance can usually be purchased for a reasonable price. However, keep in mind some auto insurers do not offer Gap insurance at all. In this case, try to first find a Gap insurance policy from another insurer before buying it from the dealer - the dealer’s premium may be more expensive.
How can I know if Gap Insurance is worth it?
By using our site to compare rates you can see if the cost of adding gap coverage to your vehicle is worth the possibility you may have to cover the difference in your car’s value in the event of a total loss (see above example). Do a free quote now to compare rates!
Related Articles:
It's hard to trust other sites when they are owned by an insurance company, why would they give me a higher price than their competition? You guys provided me with an unbiased quote and I appreciate that. I also received a really good price too. Thank you.
