Friday, March 20, 2015

The Importance of Gap Insurance

You might think that your auto insurance policy has you completely covered. After all, as long as you maintain both collision and comprehensive coverage, protecting you is its job, right? Unfortunately, though, many policies actually leave the policy holder vulnerable in the event that the vehicle is totaled or stolen.

This is especially true if you’re leasing or buying a newer car. New cars are expensive, but they very quickly lose value. In fact, they start losing value the moment you drive them off the lot.
Unfortunately, though, you’re still on the hook for the full value of the car. In other words, you owe more on the vehicle than it’s actually worth at a given time, so if you end up totaling it or have it stolen, you could owe quite a bit of money. And, since your insurer will typically only reimburse you for the current value of the car, you could find yourself on the line for the difference, and that difference can be pretty large.

The good news is that there is a way to protect yourself, and that way is through guaranteed auto protection or Gap insurance. Gap insurance covers you for that “difference” mentioned above, so that, if the worst happens, you won’t be responsible for paying it.

Anyone who is leasing a new car or who has paid less than 20% of a car’s value should definitely consider Gap insurance; some car dealers will even require it. Gap insurance is also smart for anyone who drives a lot, thereby causing their car’s value to go down more quickly, and for anyone who has taken out a long term loan, which can make building equity more difficult.

If you fall into any of these groups or if you just want the added protection and peace of mind that Gap insurance offers, there is no better time than the present to secure it. Just make sure you shop around and compare rates so that you can get the best deal and coverage possible.

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