GAP Insurance Basics

My car has depreciated quite a bit since I bought it last year. Should I get GAP insurance to make sure that my policy will completely cover the cost of repair or replacement after an accident?

Whether you just purchased a vehicle, have not finished paying for the vehicle you are driving, or are in the market for a new vehicle, you must know that car insurance may not be the end of your insurance needs. When you purchase your car the price you paid and the value of the car decreases as soon as you drive it off of the lot. This can cause the car insurance you have for your car to not completely cover the expense of your car in the case it is damaged beyond repair.

When you purchase car insurance you could be purchasing a limited amount of protection if you completely lose your car. If this happens your insurance will give you the cash value of your car. This value is usually drastically lower than what you owe on the car. What you should know is that once your car is damaged or gone this doesn’t make the loan you took out to purchase it go away. You still owe this money. When you get the money from your insurance company, you will use that money to apply to your car loan. However, there will still be a balance left over. This remaining balance is considered to be the GAP. This is where the need for GAP car insurance comes into place.

GAP car insurance is the extra insurance that was created to protect from still owing on your car loan should something happen to your car. After you have received the cash value of your car from your car insurance company and paid it to your lender the remaining balance is then paid to your lender by the GAP insurance company. This will leave you with a clear slate with your current car lender and maybe the opportunity to borrow from then again. GAP car insurance isn’t automatically added to your car insurance and should be something you ask about when purchasing your car insurance.

You should make it a point to make sure your car is fully covered by knowing what type of car insurance you are purchasing and the amount of coverage it offers. If your car is a newer car or you have a teenager or a person older than 70 years old, you may want to consider Full coverage car insurance over Liability car insurance. This gives you added protection should you or the person driving your car injures someone else or causes harm to their property. Car insurance may seem like a waste if you have gone months without using but it will come in handy at the right moment in time.