Things you need to note when taking gap insurance

Gap insurance can be a real life saver particularly when you have bought a new car on a loan and you have made may be one or two loan repayments and suddenly your car gets totaled or stolen. It will cover for the difference between what you owe to the finance company on the car and the actual market value of the car.

Let’s take an example here on how gap insurance works. Suppose the value of your car is $25000 at the time of purchase. After a year, with depreciation the value comes down to $17000. Now, at this time you car was totaled. You had actually purchased this car on a loan and your still have $19000 in loan dues. Gap insurance fills in the $2000 gap you have between the market value of the car at the time of the accident and the loan amount you still have to pay on your car.

Since gap insurance provides crucial help when your regular policy does not, it is made compulsory by finance companies who give out car loans in their loan policy. If your lease contract does not insure gap insurance, you can buy it from your car dealer or from your current insurance company. If you current insurer does not provide gap insurance, you can get gap insurance from an insurance company that offers it.

Here are a few pointers to keep in mind when you get gap insurance:

Other Discounts

You require getting auto insurance...

• • If you have taken an auto insurance policy but not taken gap insurance, check the policy terms. If terms state that the policy will pay off the fully financed amount, you need not take gap insurance.
• • Mostly gap insurance is purchased at the time of lease, however, if this has not been done, you can purchase it from insurance companies that sell it at any time during your lease period.
• • You need to have collision and comprehensive insurance coverage, because gap insurance my not come into effect if this you have not paid for this.
• • Some insurance companies require that you pay off the loan amount on your totaled or stolen car, till you fully pay off the gap insurance amount. So, check this one out with the insurance company.

Many of us forget to check up on gap insurance because we think   I have comprehensive and collision coverage right? I don?t really need gap insurance. Wrong!! They will only cover for the market value of your car. It will not pay up for the extra lease amount you still have left to pay on the car at the time of the accident. Taking gap insurance can bail you out in such situations without cutting your finances too low.