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Basically, you buy gap insurance when you have a car that is financed. Gap insurance is meant to cover the car in cases where the car is stolen or totaled. This is especially true during the earliest stages of the life of the car loan. During the initial stages of the loan, what you owe is more than the car is worth. While making payments it is crucial to have this type of car insurance.
Without it, if the car is completely totaled or stolen, you could still be responsible for making payments on a car you do not even have. The only time that you may not need gap auto insurance is if you placed a large enough down payment on the car or made arrangements so that you are not “upside down” on the car.
What It All Means
When talking about gap insurance, there may be some terms that come up that you are unfamiliar with. In order to truly grasp the concept before you buy gap insurance, you should have a clear concept of what it all means.
- Upside Down – Being “upside down” on your car means that you owe more than the car is worth. This is the most common situation to be in when signing up for a car loan, especially on a brand new car. Unless you have a paid off and valuable trade in, a hefty down payment or both, you will probably be “upside down.”
- Totaled – There is a huge difference between having a minor fender bender, an accident and a crash so serious that a car is totaled. This is when the car is wrecked beyond the point of being able to be fixed, repaired or salvaged or in cases where the expense of restoring the car would be more expensive than what the car is worth. In these cases the car is “totaled out”, and with proper gap insurance coverage you would get a new replacement. Without this insurance you will probably still be held liable for the loan payments and be without a car to drive. In other words you will be paying for a car you do not have and cannot drive.
Ensuring You Have Gap Insurance
Before even signing on the dotted line and driving that shiny new car home, you should get your gap insurance quotes. Finding out what insurance providers there are and comparing rates enables you to make wise and informed choices instead of rash ones. By giving us just your zip code, you can get your gap insurance quotes today and take home that brand new car worry free.