Should You Purchase Gap Insurance?

If you have ever purchased a new car, then you know the value of your car takes a significant hit as soon as you drive it off the lot. The depreciated value is typically what it is worth to your car insurance provider if you ever experience a total loss. The problem is, you have a deficit because the amount you financed is still the price the car was on the lot. Should you get gap insurance to make up the difference?

Understanding Gap Insurance

Gap insurance is much like other types of insurance. It helps you protect your finances from the unknown. For instance, if you total your car in an accident, it’s very likely you will be responsible for the difference between what is owed on the car and what the car is worth. If you don’t have gap insurance, then you will be responsible for paying the difference. In this instance, owning gap insurance may help you out of a tough situation.

Who Should Purchase Gap Insurance?

There are many factors that may affect your decision to purchase gap insurance. If one of the following scenarios applies to you, then you should consider purchasing gap insurance.

• You didn’t pay 20 percent down on your car purchase
• You are leasing a car
• You have a long term on the car’s financing

With each one of the scenarios, if you get in a wreck, you are on the hook financially. In each of these instances, gap insurance may protect your household’s income.

How to Purchase Gap Insurance

Like any other type of insurance, most people purchase their insurance from their local agent. By purchasing gap insurance through an independent insurance agent, you can pay it along with your auto insurance each month.

Gap insurance is a great add-on option for many new car owners. Instead of worrying about saving the money to cover your depreciated vehicle, you can rest easy knowing you may be eligible for gap coverage.