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Do You Really Need Gap Car Insurance?

In order to know whether you need gap car insurance or not, you first need to understand what it is. Read on and understand what it means and then decide if you want it.

Gap car insurance will cover the difference or the gap between your car value in the market and the outstanding balance on your loan. Well, you might think that they are the same. However, the fact is that it is not always so.

When you begin to drive your car, it loses value or depreciates. In fact, generally, any car depreciates approximately 20 % immediately after leaving the dealership. This means that if you bought a brand new model that was worth $30,000 then as soon as you drive it, its value now becomes only $24,000. Now, that is a big decrease, isn't it?

Now, if you get into an accident then your liability coverage, collision and comprehensive coverage will pay for the car at its market value. Therefore, even though the insurance company is paying for your car, you will still have a deficit of about $6000, which you might have to come up with by yourself, if you do not have gap car insurance.

While you do not really require this car insurance because it is not mandatory and you can buy and drive your new car without it, you could be exposing yourself to some losses.

Now, it is also important to understand that not all of the gap car insurance policies will be the same. While some might cover losses because of accidents and theft, others might not. Therefore, before purchasing a policy, always make sure what it covers. You should also know that most often gap insurance does not cover older vehicles and that is quite logical.

Nobody requires you to take a gap insurance. However, it is an assurance for the peace of your mind that you do not have to worry about falling in debt while paying for your totalled car if you get into an accident shortly post your purchase.

You can take gap car insurance when you purchase the car through a dealership. However, it will cost you more compared to if you take it from a regular insurance agent.

Before going for this insurance, you should check with your present policy to see if it is already included in it. Consider the price of the policy and whether you are comfortable paying for the difference between the coverage amount and market value before making any decision.

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