When you buy or lease a new car, you expect it to hold its value. Unfortunately, the moment you drive it off the lot, your car starts to depreciate in value. In fact, most cars lose 20% of their value within a year. This can create a problem if you’re involved in an accident, and your car is totaled or badly damaged. Even if you have a standard auto insurance policy, it might not be enough to cover the full cost of replacing your vehicle.
That’s where gap insurance comes in. When you finance the purchase of a new car and put down only a small deposit, the amount of the loan may exceed the market value of the vehicle itself. This means that if you’re involved in an accident, and your car is deemed a total loss, your standard insurance policy may only cover the current market value of the car, leaving you to pay the difference out of pocket.
That’s where gap insurance comes in. Gap insurance covers the difference between the current market value of your car and the amount you owe on it. This means that if you’re involved in an accident, and your car is totaled or badly damaged, your gap insurance policy will pay the difference between what your standard insurance policy covers and what you owe on your car loan.
Gap insurance is especially important for those who finance the purchase of a new car or lease a vehicle. In the early years of the vehicle’s ownership, the amount of the loan may exceed the market value of the vehicle itself. If you’re involved in an accident during this time, gap insurance can help cover the difference and protect you from financial loss.
So, how do you get gap insurance? Many car dealerships offer gap insurance as an add-on to your standard insurance policy. You can also purchase gap insurance from an independent insurance provider, either online or in person. It’s important to shop around for the best rates and coverage options before committing to a policy.
In conclusion, gap insurance is a must-have for anyone who finances the purchase of a new car or leases a vehicle. It can protect you from financial loss in the event of an accident by covering the difference between what your standard insurance policy covers and what you owe on your car loan. If you’re in the market for a new car or are leasing a vehicle, make sure to consider gap insurance as an important part of your insurance coverage.
