If you're buying a brand new car for the first time, you might think that once you drive off the lot that you'll have money issues if you should total it. The truth is you may be able to offset the costs of such an accident with gap insurance. Most service agreement plans and insurance companies offer gap insurance. This guide explains what gap insurance is and how to get it:
What Gap Insurance Is
Gap insurance covers the gap between what your insurance pays in the event of a total loss accident and the amount of money it takes to pay off your car loan. More often than not, the insurance company depreciates the worth of your vehicle, which usually means that for most makes and models, the amount owed to the lien holder is more than what the car is worth.
If you opt for gap insurance, you'll also have deductible coverage as well. Unless you can afford the high premiums, your policy will have a deductible. If you total your vehicle, the amount of the deductible comes off the amount you get from insurance company. When you add the deductible to the depreciation, you could find yourself on the hook for a lot of money to pay your totaled car off.
How to Get gap Insurance
Ask your insurance agent about gap insurance when you call them to place insurance on your new car. Additionally, check with the dealer to see if their service contract offers it. You may be able to roll the cost into your monthly payments for the car.
Note: You can choose an insurance plan that offers no deductible and protect yourself a little that way, but the depreciation of the vehicle won't be covered.
A nice down payment on your vehicle covers depreciation and a deductible for a while, but as time goes on, the less the car is worth and eventually the down payment won't be enough to cover it.
The amount of gap insurance is the amount of your deductible and depreciation up to the amount of the loan. If you owe $20,000 and the insurance company gives you $15,000, you're covered for the other $5,000. The money goes directly to the lien holder and you will not receive a check for gap insurance.
As you're looking at new vehicles, consult with your insurance company to see if you'll need gap insurance and then decide the best way to obtain it. When your dealer tries to sell you a service plan, make sure it includes this insurance so that you'll have more protection while on the road, no matter what might happen.
To learn more, contact a company like Winder Insurance Center with any questions you have.Share
9 January 2015
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