Should You Buy Gap Insurance?
Like most people, you have probably heard the term “gap insurance”, but have not been sure exactly what it is. If you are getting ready to finance or lease a car, it is a really good idea to learn all you can about it. Gap insurance is a policy that will protect you financially for the “gap” between what you owe the bank on your car versus what it is actually worth at the time of a theft or total loss. In fact, GAP actually stands for “guaranteed asset protection.”
Let’s say you buy a brand new car. Did you know that your new set of wheels will begin to deapprecaite the moment you drive it off of the dealer’s lot? In fact, auto industry experts say that automobiles will lose nearly 18% of their value annually for the first 6 years after purchase. Many people do not realize that if you owe $10,000 on your car loan or lease, but it’s only worth $8,000 at the time of a total loss, you could be held responsible for paying the financing company back the difference (in this case $2,000) out of your own pocket.
Do I Need Gap Insurance?
All car owners have their own unique set of financial circumstances, so it is difficult to say whether everyone would benefit from having Gap insurance on their policies. Here are some good guidelines to consider regarding whether you should purchase Gap coverage.
- Small or No Down Payment – If you purchased or leased a car with little or no money down, Gap insurance is a great option. The closer you are to 100% financing, the more financial risk you take should a theft or total loss occur.
- Longer Loan or Lease Term – The further in the future your car’s pay off date is, the greater the chance that the value of the vehicle will drop much faster than the amount owed. Gap insurance is a great way to protect you against loss in the later years of the financing agreement.
- Driving Many Miles – Putting a lot of miles on a car will depreciate it even more than standard market forces will. If you plan on more putting more windshield time in than the average driver, Gap insurance will be an important part of your financial picture.
- Great Car, Poor Resell Value- There are some reliable cars out there that just don’t do well in the resell department. Should you happen to pick a vehicle that doesn’t retain anywhere near its original purchase or lease cost, make sure that Gap coverage is a part of your policy.
- One Loan, Two Cars – Many people will trade in a financed or leased car before it is paid off and load the remaining balance into another car’s financing agreement. This situation will usually cause people to immediately owe more than the car is worth, even when it is new. This is one instance when Gap insurance is a financial must.
So Do You Need Gap Insurance?
Adding Gap insurance to your policy is not very expensive at all. When you consider the potential financial protection it will afford you, it is well worth it. Most insurance carriers can provide you with a Gap policy for just several hundred dollars per year. Don’t get caught being responsible for having to pay on a car loan for a vehicle you no longer have. Insure On The Spot has helped thousands of motorists protect themselves with a Gap policy.
Contact us today to learn more about how we can provide you with the peace of mind you deserve with this important insurance coverage.