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

If you bought a new car, the value depreciates immediately you drive it off the car lot. If your new vehicle is seriously damaged or totaled in an accident, your standard insurance will pay the vehicle’s current value when you file the claim. This can be a problem if you took a loan to buy the car and the amount left to be paid exceed the car’s actual market value. Your standard car insurance will only pay your car’s current value, and if you owe more than the current car value, your finance company will want you to pay your loan immediately. A gap insurance policy can help you pay the difference.

Why GAP Insurance Policy?

GAP insurance policy can protect you from a financial loss if your car is stolen or damaged after an accident before paying off your loan. If the balance to pay on your loan is higher than the current vehicle’s value, you’re on a difference. A GAP insurance policy helps cover the difference between what your car insurance policy pays and what you owe the lender.

Should I Get GAP Insurance?

A gap insurance policy is needed in situations when:

• • The car is financed.
  • The car is fast-depreciating
  • The car down payment was less than 20 percent

Where Can You Buy GAP Insurance?

You can buy a gap insurance policy from your car insurance companies or car dealerships. If you purchase a gap insurance policy through a car dealer, you’ll likely pay more than buying it from your insurer. Adding a gap insurance policy to your existing auto insurance policy only costs a few amounts of money.