Whether you are purchasing a new or used car, the issue of gap insurance might be brought up to you at some point in time. Unsure of what gap insurance is?
Gap Insurance will cover the difference between your car’s depreciated value and what you actually owe on your auto loan if your car is stolen or totaled.
Personally, I’ve never had to use gap insurance but I’ve always wondered if it was important. Is it something that you need? Or is it something extra you pay for but never have a use for. I found out a couple years ago that it is important as a just in case.
When would you be offered Gap insurance?
You should get gap insurance in any of these instances:
- You are purchasing or leasing a new or slightly used vehicle.
- You are buying a vehicle of significant value.
- You are financing a new or used vehicle without a large down payment, creating a “gap” between your vehicle’s actual value and your loan amount.
- You do not have significant cash savings that would allow you to cover the difference between the amount you owe on your loan and the actual cash value if your car is stolen or totaled.
How do you purchase Gap Insurance?
There are options in getting the gap insurance. You can take the offer when you purchase the car from the dealership. Most places have a package you can add into financing that will cover the leftover cost if your car insurance doesn’t cover everything.
However, you have other options such as your car insurance company. Some insurance companies offer a type of gap insurance that you can add into car insurance policy. Make sure you do your research when getting ready to purchase because you have options. And decide on your own if you need the gap insurance.