When you go to purchase a new vehicle your car dealer will ask you if you'd like to purchase a product known as gap insurance. Is it worth it? Some dealers will sell it separately while others will try to include it in other enhancement packages. In short, the answer is yes, but let's take a closer look at what gap insurance is and what in what instance you might need to use it.
Gap insurance is a specialized form of insurance coverage very unlike the liability and comprehensive and collision coverage you typically purchase for a new vehicle. Instead of covering damage to the vehicle itself, gap insurance covers the loan.
Let's say, for example, you purchase a car for $20,000. The moment you drive off the lot that vehicle depreciates and, for the purpose of this example, we'll say it's immediately worth $18,000 instead. Over the next year you'll pay $200 per month towards your loan but in the 12th month you get into an automobile accident and your vehicle is totaled. You still owe $15,600.
The insurance adjuster from your insurance company is going to look up the Kelly Blue Book value of your vehicle and may determine that your car is only worth $14,500. The insurance company will not pay any more than $14,500 to your lender, leaving you with a balance of $1,100 due to the finance company. You may not have the car any longer but you still owe that money and you're responsible for paying it out of pocket.
So is gap insurance worth it? Yes, and here's why. Gap insurance covers the difference between the value of your car and what you still owe on your loan. So if you find yourself in a situation like the one above you won't have to pay $1,100 out of pocket. You'll simply file a claim with your gap insurance company to have the difference paid.
The problem is that many people believe they have to purchase gap insurance from their car dealerships. The truth is that you do have the right to shop around and you might be able to find gap insurance from an independent insurance agency at a lower price.
CarInsuranceHub.com can put you in contact with several different types of insurance carrier, some of which do sell gap insurance. You'll pay a flat rate that will cover you until the end of your loan and, in the end, you will be secure in the knowledge that you'll never be stuck paying for a car you no longer own. Gap insurance really is worth the price when it comes to that type of financial security.