Do I Need GAP Insurance?
Automobile insurance comes in many different varieties and finding the one that meets your needs is essential to getting the most from your money. GAP insurance is one type of automobile insurance that not much is known about, but if you purchase a new car, it may be a type of insurance that you need to check into and consider. This special type of car insurance insures that your car will be paid off in the event of an accident, especially if the accident occurs during the first part of the loan, when you may owe more than the car is worth. Most free online insurance comparison websites offer quotes from GAP insurance providers, in addition to liability insurance, but it is important to do your research to see if you really need it. What do you need to consider when deciding to purchase GAP insurance?
The loan versus the value. New cars and trucks depreciate (go down in value) from the minute that you drive off of the car lot. If you put little or no money down, then it is possible that you will owe more on your loan than what your car is worth. If you have an accident within the first year or so of your loan and total your car, the insurance company may not even settle with you for enough to pay off your loan. GAP insurance steps in at this point and covers the difference, keeping you from owing money to the lender.
Whether you are buying or leasing. If you are leasing your car, you are paying down the principal on your loan even slower than when you are buying. This can leave you upside down on your loan if you total the car. GAP insurance is normally a requirement when you are leasing a car, but if you are not asked and plan on leasing, you want to be sure that you check into this type of insurance to protect yourself financially.
Whether you are trading in a car that you own money on. If you are trading in a car that you still owe on, this adds to the total amount of the loan on your new car. This can cause you to be upside down in your loan and owing more than the new car is worth. A totaled car after an accident can mean that you could owe hundreds or thousands of dollars to the lender if you do not have GAP insurance.
GAP insurance can mean the difference between financial ruin and damage, especially if you are purchasing a new car. If you buy a car with a low or no down payment, lease a car, or are trading a car that is not completely paid off, you will want to be sure that you check into GAP insurance. This can protect you if you total your car and are upside down in your loan and can keep you from owing your lender hundreds, if not thousands, of dollars. Consider it today.