Melanie Musson

Published Insurance Expert

Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. Through her years working in th...

Published Insurance Expert

Daniel Walker

Licensed Insurance Agent

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring tha...

Licensed Insurance Agent

UPDATED: Mar 20, 2012

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It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance-related. We update our site regularly, and all content is reviewed by auto insurance experts.

UPDATED: Mar 20, 2012

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.

UPDATED: Mar 20, 2012Fact Checked

Even though we are always aware of everything that is going on around us while we are driving, we don’t usually think about accidents happening. Unfortunately, they happen every day, and many accidents are so serious that there is no way anyone is going to drive the vehicles involved ever again. Now, what happens when someone is in an accident with a brand new vehicle, and the vehicle ends up being a total write-off?

The loan still has to be paid, and a regular insurance policy is only going to pay the current replacement value of the vehicle. While this is a big help, it may be that you owe a lot more on the loan than what the insurance company is willing to pay. This is why many people decide to buy GAP insurance.

GAP Insurance Defined

buy gap insurance

In a nutshell, GAP insurance is coverage that will pay the difference between what you owe on a vehicle and what it is actually worth if it is totaled in an accident. Let’s break it down into numbers so you can see how it really works. If you purchase a vehicle that costs $20,000, you will make a down payment, probably around $500. Now you owe $19,500. Let’s say you make five monthly payments at $300 a month, for a total of $1,500 then you get into an accident and total the vehicle. You still owe $18,000 on the vehicle, but your insurance company is going to look at the blue book value, which will probably be considerably less.

You are still expected to pay off the balance of your loan. How are you going to pay for it? If you buy GAP insurance, you will not have to worry about coming up with enough money to pay off the balance. The one thing you do need to remember is that there are limits to how much a GAP insurance policy will pay out, and you may not be able to completely pay off the loan, depending on the limits that are set in your policy. Another thing you need to keep in mind is your deductible. You will have to pay this before you can receive any money for your claim.

You Might Want to Buy GAP Insurance if You Buy a New Car

Depending on how much of a down payment you put on a new vehicle, you could end up being upside-down if you end up in an accident and the vehicle is a total write-off. There are other reasons why you could be upside-down. If you have a high interest rate or you rolled over other expenses into your car payments, you could end up owing a pretty penny if you don’t buy GAP insurance. If you don’t want to pay for this extra coverage, you need to think about increasing the amount you are willing to pay for a down payment in order to not be upside-down in the event of an accident that destroys the vehicle.

You May Be Required to Buy GAP Insurance

If you are leasing or financing a vehicle, it may be that you have no other option but to buy GAP insurance. In some states, it is actually a requirement for lessors to suggest that customers buy this type of insurance coverage. Some contracts require that GAP insurance be included with the actual loan payments, which can come in handy, except that you may not be able to shop around to choose your own insurer. It is a good idea to buy GAP insurance whether or not it is required, because you don’t want to have any added expenses if you end up totaling the vehicle and have to buy another and still pay off the one that was totaled.

Get Quotes before You Buy GAP Insurance

The only way you are going to know whether or not you are getting the best rates for all of your insurance coverage, including GAP insurance, you need to shop around. After all, you would do this for any big-ticket purchase, so why wouldn’t you want to make sure you also get the best deals on car insurance? Shopping around means getting quotes from as many insurers as possible, which used to take a lot of time and effort.

Today, you can do it all online, and we can make the job even easier. Give us your zip code, and we will enter it into our databases to get quotes from insurance companies in your area and many of the national insurers too. Then, you can buy GAP insurance knowing that you are not paying too much for it.

 

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Melanie Musson

Published Insurance Expert

Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. Through her years working in th...

Published Insurance Expert

Daniel Walker

Licensed Insurance Agent

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, life, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring tha...

Licensed Insurance Agent

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance-related. We update our site regularly, and all content is reviewed by auto insurance experts.