What is gap insurance?

Gap insurance is usually available as an additional coverage on your auto insurance. In what way does gap insurance benefit you? Let’s take a look.

You decided to buy a car and opted for a loan to purchase the car. A year passes by and you have been paying up your loan installment accurately, but in the midst of all this your cars get into an accident and its totaled or it’s stolen. You still need to pay off the loan balance in this situation.

This is a typical situation in which gap insurance can come to help. If your car is worth a particular value and you still have a loan balance to pay off, gap insurance will pay the difference in these values to you. This is something more than what comprehensive and collision coverage on your new vehicle can do for you.

Remember once you buy a car and the moment it hits the rods, deprecation starts to take effect. With comprehensive and collision, you get only the market value of your vehicle. This value will be 20-30% lower than the purchase price of the vehicle after depreciation. However, with gap insurance, you don’t have to bother about this 20-30% because it will pay up for the difference between the actual loan amount on the car and the actual market value of the car. So, if you have bought a car worth $25000 and a couple of months later its value is $18000 and you still have a loan balance of $23000, in the event your car gets totaled or stolen, gap insurance will pay for the $5000 gap in these figures.

Other Discounts

You require getting auto insurance...

Gap insurance is mostly available for newly purchased vehicles, so you may not find an insurance provider who is offer if for you older vehicles. Very few insurers offer gap insurance for any vehicle.

If you have decided to go in for gap insurance, check with your current insurance provide if they have built this into their premium. If not, you can purchase it by paying extra. If your current insurer does not offer gap insurance at all, you have to find one who does, because not all insurance companies offer this. you can also purchase gap insurance from he car dealers, but they dealer?s premium is expensive so you will have to be ready for this in case you are going to go ahead and buy it from the dealer.