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Gap Insurance
Gap insurance essentially is a financial bridge between what you owe on a car loan and what the vehicle is estimated to be worth. Sometimes known as loan/lease or loan/lease payoff insurance, this coverage can be a necessity for those who buy or lease vehicles.
What Gap Insurance Covers
New cars depreciate rapidly, sometimes by as much as 30% within the first three months after purchase. When someone steals a car and it can't be recovered, or if a car is totaled in an accident, your insurer will only pay the vehicle's calculated value right before the incident. This leaves many new car owners or lessees with a large discrepancy between the money their insurer gives them and what they owe on their car loan.
Gap insurance fills this void.
Let's say you buy a new car for $30,000. You make a $2,000 down payment, take out a $28,000 loan, and set up monthly $250 payments.
Four months later, you owe $27,000 on the loan. However, your car gets destroyed in a wreck. Your insurer estimates the car's market value, and pays you $21,000 for your loss. That means you're facing a $6,000 difference between how much you owe the lien holder and the amount you received from your carrier.
Gap insurance eliminates this deficit, and bails you from this financial hole. And, sometimes it even pays your car insurance deductible.
Who Needs Gap Insurance
Whether you need―or are required to have―this guaranteed auto protection (GAP) depends on a few factors.
Lease contracts often state that lessees must have this insurance; often, it will be included in the lease agreement for a fee. Otherwise, you probably won't be forced to obtain the coverage.
But, the smaller your downpayment, the more important gap insurance becomes. And, the newer and the more expensive the car, the more having this insurance may be a sound move. Remember, this insurance basically involves the depreciation of your vehicle.
Keep in mind, though, there are limits on how much a gap policy will pay; check with your prospective gap provider for details. Also, many gap policies require you to carry comprehensive and collision coverage with your personal auto policy. And, other conditions may apply.
Where to Get Gap Insurance
Your auto insurance policy may already contain gap insurance. If not, you can purchase it through most large carriers, or obtain it from companies that specialize in this insurance. Contact your current carrier, or just do an online search for "gap insurance companies" and numerous choices will pop up.
Again, gap insurance often is included in lease contracts. But, be sure to see what's covered and how much you'll pay for the protection.
How Much Gap Insurance Costs
The cost varies according to how you obtain the coverage.
If it's included in your auto policy, you won't have to pay for it separately. Otherwise, you probably will. But, compared to some other insurance products, gap insurance isn't overly expensive, especially given the protection and peace of mind it offers.
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- Full Coverage Auto Insurance
Full Coverage Auto Insurance Info. Get Info On Physical Damage, Collision And Comprehensive Insurance As You Find Out How Auto Insurance Companies Define Full Coverage Insurance.
- Rental Reimbursement Coverage
Learn What Rental Reimbursement Coverage Pays For. This Type Of Auto Insurance Is Convenient If You Need A Car Rental While Your Car Undergoes Auto Repair After An Auto Accident.
- Loan Lease Payoff Coverage
Find Out When Loan Lease Payoff Coverage Is Required. Learn More On Actual Cash Value And Adequate Auto Insurance If You Have An Unpaid Auto Loan. Some Lenders Require More Car Insurance.
- SR 22
Online Guide To SR 22 And Auto Insurance. Get Info On SR 22 Filing, Obtaining Proof Of Insurance And Maintaining A Car Insurance Policy.
- Emergency Road Service Coverage
Info On Emergency Road Service Coverage Offered Via An Auto Insurance Company. Learn More On Car Insurance Policies With Roadside Assistance For A Car Breakdown.
- Towing And Labor Coverage
Info On Towing And Labor Coverage And Auto Insurance. Learn The Benefits Of Having Towing Insurance For A Car Breakdown Or Auto Accident. Determine If You Need This Type Of Car Insurance.
- Mechanical Breakdown Insurance
Guide To Mechanical Breakdown Insurance For New Cars. Learn More On The Types Of Car Insurance Customers That Best Benefit From This Type Of Auto Insurance. Avoid Pricey Auto Repair.
- Umbrella Insurance
Umbrella Insurance Defined. Learn More On Umbrella Policies, Additional Liability Insurance And Covering Losses That Might Not Be Included By Your Auto Insurance Policy.
- Uninsured Motorist Coverage
Online Guide To Uninsured Motorist Coverage And Auto Insurance. Find Out More On Car Insurance Policies That Protect You In Car Accidents With Uninsured Drivers.
- Underinsured Motorist Coverage
Guide To Underinsured Motorist Coverage And Auto Insurance. Look Online For Info On Car Insurance Policies That Cover Expenses From Car Accidents With Underinsured Drivers.
- Personal Injury Protection
Online Guide To Personal Injury Protection Coverage And Auto Insurance. Learn More On Car Insurance And Personal Injury In Case You Get In An Auto Accident.
- Liability Insurance
Guide To Liability Insurance. Learn More On The Types Of Liability Coverage And Auto Insurance Such As Bodily Injury And Property Damage Liability. Get More On Liability Car Insurance.
- Physical Damage Insurance
Online Guide To Physical Damage Insurance And Auto Insurance. Get Info On Car Insurance Coverage And Property Damage In Case You Get In A Car Accident.
- Rental Car Insurance
Online Guide To Rental Car Insurance And Auto Insurance. Learn More On Insurance Coverage Before You Rent A Car. Not All Insurance Policies Cover Auto Rentals.
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