Guide to Gap Insurance Coverage for Your Auto

Many people have perhaps never heard of gap insurance coverage. However, this is a great insurance plan especially for people who buy new vehicles. When an individual buys a new automobile, as soon as they leave the dealership its value goes down. This is unfortunate, but true. A car loan is based on the dealership price, while car insurance companies base their value on what the vehicle is actually worth. Gap insurance coverage insures the difference in the two. For example, John buys a new car that costs $26000. He borrows this amount from the bank. Two weeks later John has a car accident, an appraisal is done and the car’s value is $24000. His car was totaled and John is still obligated to pay the bank loan of $26000. Gap insurance coverage takes care of the other $2000.

Gap insurance coverage is not a legal requirement. However, many dealerships, especially when leasing cars do require the buyer to purchase gap insurance coverage. This not only protects the buyer’s investment but also insures the dealership will get the total amount of the car in case of an accident or theft. Most gap insurance coverage plans protect car owners against accidents and theft. This makes sense since a thief is more likely to steal a new vehicle than an old clunker. Some insurance companies do offer gap insurance coverage for older cars but it’s usually offered to only those who own new cars. When financing a new vehicle through a lending institution it is normally stipulated the owner have full coverage insurance on their vehicle. Lenders do not usually require the borrower buy gap insurance coverage. If they choose not to buy gap insurance coverage and their car is totaled or stolen, they are compelled to pay the lender the depreciation amount.

Before buying a new car, people should contact their insurance provider to see if they offer gap insurance coverage. Some insurance providers have this feature included in their plans. If they don’t and the purchaser is not willing to switch insurance companies, they will be forced to buy gap insurance coverage from the dealership. Most dealerships do offer their customers gap insurance coverage but at much higher premiums. This is something a person should really consider before buying or leasing a new car. Of course, they do have the option of buying gap insurance coverage from a different insurance company.

Gap insurance coverage is a great comfort for the owners of new vehicles. It’s unfortunate when people finance an automobile, it gets totaled or stolen and they are in debt to the bank. Their automobile is gone, their car insurance couldn’t foot the entire bill, they have no vehicle and they still owe the bank a considerable amount of money. This can all be different if a person buys gap insurance coverage. If you are not familiar with this type of insurance coverage, become familiar with it. Contact your insurance agency to inquire about gap insurance coverage. The Internet is a great data base for insurance information. With sites like CarInsuranceRates.com, you are guaranteed to learn all you need to know about gap insurance coverage. They can put you in touch with gap insurance coverage providers in seconds. It’s also easy to do comparison shopping for insurance on the Internet. You are able to review your options for gap insurance coverage, compare them and make a decision based on your findings.