You Could Need Gap Insurance and Not Even Realize It
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UPDATED: Feb 18, 2022
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It’s hard to imagine something like gap insurance could put a damper on getting a new car, but without knowing about it this could be what happens. Getting a new car is an exciting time in one’s life. Whether you are buying or leasing, getting a used car or the brand new car of your dreams, it is about changing and driving something that is at least new to you. In fact, you could be looking to buy your very first car and even plan your first official road trip.
So what could possibly put a damper on this? What dark cloud could rain on your new car parade? Not having the right insurance could make all the difference in whether this is a joyous occasion or a vehicular nightmare.
The first step is to get a true grasp of the concept of gap auto insurance, what it does and why you probably need it. In fact, you need to find out before it is too late just how crucial having gap insurance is.
Gap auto insurance is usually of the utmost importance for those who are buying brand new cars. Even leasing a new car probably means you need to get gap insurance quotes and get a policy in place. So before you get a true idea of how important it may be, it’s time to understand what it is. Gap insurance is:
- It is coverage that you need if the car loan you are paying on is more than the value of the car.
- This is especially true for new cars.
- Gap insurance is also usually needed within the early stages of almost any car loan or lease.
- For those who have little to no down payment, you are probably in a situation where you owe more on the car you are paying for is worth.
- If you have no trade in or a trade in with little value, you are probably driving off the lot owing more in car loans than what that car is worth.
- This is especially true for buyers who are bringing in a trade in that is still also upside down. If you owe on a car, you are trading in more than the car is worth to acquire another vehicle that gets you into a loan for more than the value of the car, you are going to have to get yourself gap auto insurance.
What’s the Big Deal?
You drive that car away, and before even that new car scent is gone, the neighborhood trash truck rolls over it like a steam roller. The car ends up “totaled out” and you think any minute now the dealership will be dropping off that new replacement car. That’s when you call your insurance company to find out the status of your claim and get the bad news. This is when you hear about “gap auto insurance” for the first time and find out the company you went with isn’t even one of many gap insurance providers.
- If your car is “totaled”, it means it was involved in an accident resulting in complete destruction. The car is either beyond repair or the costs to repair it would be more than the value of the car or close to the same value. With proper insurance this is when a new car replacement would be in order. Think about this, even cars that suffer severe hail damage sometimes are “totaled out” because it would cost too much for the cosmetic repair. Without gap insurance you may lose the car and still get to make the loan payments.
- If your car is stolen, the situation could be exactly the same. Just because you cannot find the car doesn’t mean you won’t have to pay for it. Once the loan is in place, you will be paying for the car whether it is damaged beyond repair or stolen. The bottom line is that you make the payments whether you have a car to drive or not. Gap insurance is what will ensure that the car will be replaced.
Do you know why this may be even more crucial for a car you lease?
If you hadn’t even planned on buying the car or making long term payments, but the car is totaled out or stolen, without gap insurance you may be responsible for the entire value of the car without having it to drive.
Find out about gap insurance providers today before getting your new car. By taking a second to type in your zip code, you can get gap auto insurance quotes and be on your way to total protection.