Gap Car Insurance: Do You Need It?

 


Visitors: 242

What is gap car insurance and how do you know whether you really need it? Gap car insurance, like many other types of insurance isn’t necessarily required. That is to say that you can certainly purchase a new car without gap car insurance; however, you could be leaving yourself open for some losses if you don’t purchase it. Read on for more tips to better understand whether you need gap car insurance or you can skip it.

Gap car insurance covers the difference between the market value of your car and your loan amount. Aren’t the two the same, you might ask. Not necessarily. You see, the moment you drive your car off the lot it depreciates, or loses value, immediately and quite significantly. Let’s say you purchase a new car and pay $25,000 for it. On average a car will depreciate at least 20% right after it leaves the dealership. That means your brand new car is now worth only $20,000. What happens if you have an accident soon after the purchase? Even if you have full insurance coverage, including comprehensive and collision, your insurance policy will still only cover the market value of the car. Unfortunately, even though the market value and insurance policy are now worth only $20,000 you still owe in the neighborhood of $25,000 for the car. Without gap car insurance you’ll be stuck covering that additional $5,000 on your own.

Be aware that not all gap car insurance policies are the same and this is important. For example, some gap car insurance policies will cover losses due to theft and accidents but not all so be sure to ask questions regarding specifically what is covered in the policy before you take it.

Usually, gap car insurance is a good idea if you are about to purchase a new car and are concerned that you wouldn’t be able to cover the difference between the market value and the amount that would be cover by the C&C policy. Be aware that gap insurance is not available for older vehicles in most cases.

While you’re certainly not required to take out gap car insurance by your lender or the dealer, it can help you to rest easier in knowing you won’t be stuck owing thousands of dollars on a totaled car in the event that you suffer an accident or theft shortly after the purchase.

It is also important to understand that if you finance your car through the dealership you can usually take out gap car insurance at the time of the purchase; however, you’ll probably end up paying more for the policy than if you simply took it out with your regular auto insurance agent.

Before taking out gap car insurance, always be sure to check your existing policy to find out whether gap insurance might already be contained within that policy. You never know, it might not necessary to purchase an additional policy at all. If it’s not included, give some thought to whether the price of the gap insurance would be worth the trade-off of not having to worry if you have an accident and can’t afford to pay the difference between market value and coverage amount with a regular policy.

Joe Kenny writes for the Loans Store offering cheap loans and offer more information on car loans and other loan topics available on site.
Visit Today: http://www.ukpersonalloanstore.co.uk

(603)

Article Source:


 
Rate this Article: 
 
Auto GAP Insurance - Is it Really Necessary, or is it a Waste of Money?
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

Get Car Gap Insurance to Avoid Negative Equity

by: Dave Foord (December 08, 2008) 
(Insurance/Car Auto)

Gap Car Insurance Protects Your Auto Financing Investment

by: Marilyn Katz (June 14, 2007) 
(Insurance/Car Auto)

Car Buying Tip 8 Negative Equity, Your Auto Loan and GAP Insurance

by: Justin Reynolds (August 13, 2008) 
(Automotive)

Online Car Insurance Rates Are Lower - Car Insurance Tips from Budget Car ..

by: Ken Charnley (September 07, 2006) 
(Finance)

What is 'GAP' Insurance

by: Jacob Joseph (January 19, 2007) 
(Insurance)

Auto Gap Insurance

by: Tristan Andrews (July 03, 2006) 
(Insurance)

Student Travel Insurance For Your Gap Year

by: Josh Harrison (August 12, 2008) 
(Insurance/Travel)

GAP Insurance Protecting Your Vehicle Asset

by: Andrew Crowther (December 09, 2008) 
(Insurance/Car Auto)

Travel Insurance - Get Covered For Your Gap Year

by: David Collins (December 17, 2007) 
(Insurance/Travel)

Auto GAP Insurance - Is it Really Necessary, or is it a Waste of Money?

by: Shaun Patrick Davidson (March 27, 2008) 
(Insurance/Car Auto)