It is not something that we want to think about, but sometimes things happen, such as car accidents, vandalism and theft, and we end up having to pay a lot of money to replace our vehicles. Having full coverage auto insurance is a good way to make sure that most of your expenses are taken care of, which is especially important if you are financing a vehicle and are still making payments. But, what if your coverage isn’t quite enough, and you don’t have enough money to replace your vehicle? This is where GAP insurance can come in handy. You may be wondering, “What does GAP insurance cover”? Basically, GAP insurance is only used when your insurance does not cover enough to pay for all of the damages while you are still making payments on your vehicle.
How Does GAP Insurance Work?
Many people find GAP insurance confusing, but actually it is pretty simple to understand. Let’s say that you have decided to finance a vehicle. The vehicle costs $10,000, and you make a $500 down payment. You now owe $9,500. Now, what would happen if you only made a couple of payments and then totalled the vehicle in an accident or it was stolen?
The second you drive the car away from the lot, it begins to decrease in value. Almost immediately, it is not worth what you paid for it, and your insurance will only cover the current value of the vehicle. Would you be able to pay back the loan in its entirety if your insurance did not cover the entire cost to replace the vehicle? Probably not, but if you have GAP insurance, you won’t have to worry about it.
GAP Insurance and Buying a Vehicle
If you are buying a car outright or making payments on it, you can be sure that your vehicle is not going to be worth the price you paid if you are in an accident later on down the road. What does GAP insurance cover? It covers the additional cost to replace your vehicle over and above that which the insurance company is willing to cover from your full coverage policy. If you are buying a new vehicle, consider having GAP insurance, just in case.
GAP Insurance and Leasing a Vehicle
Even though a lease is not the same thing as purchasing a vehicle, you are still responsible for the cost of replacing the vehicle if it is stolen or totalled in an accident. The amount that you pay for the lease is probably considerably lower than what it is actually worth, and having GAP insurance will help to cover the additional costs that you probably can’t afford to pay out-of-pocket.
Getting the Best Prices
Now, you don’t have to ask, “what does GAP insurance cover”. You know what it is and why you need it, now all you have to do is go out and get it. The thing is to get it from the insurer that is going to offer the best rates. This may not necessarily be the insurer you currently deal with. Give us your zip code, and we’ll search our databases to get quotes from insurers in your area and national insurers so you can get the best deal on GAP insurance.