Gap Car Insurance – What It Is And Why You Might Need It
Let’s say you just financed a brand new vehicle for $20,000. You bring it home and a week later, it’s stolen and the authorities aren’t able to recover its remains. You’re probably thinking (like most people) that everything will be just fine because your insurance company will reimburse you for the value of the vehicle. This is true, but you will probably be shocked to find that the value the insurance company places on the car is much less than what you paid for it (most cars depreciate $2K as soon as you drive them off the lot). Thus, you are left with a bill of $2,000 that you still owe to the financing company.
This is a real world scenario and is much more common than you might think. GAP car insurance (more formally known as loan/lease payoff coverage) was invented to address this particular scenario. (For rates on this type of coverage in your area of the US, click here to get cheap Orlando Auto Insurance.) There is a period of time when owners of new cars (or people that lease) are ‘upside down’ on their car’s value because the car has depreciated at a faster rate than that person is paying off the loan. This is more common in the early stages of a loan or lease as the car depreciates a substantial amount as soon as it is driven off the lot. GAP car insurance will cover you in the event you experience a loss like this and will pay the difference between what the car was valued at, and the amount you still owe on the vehicle.
So, should you get this type of coverage on your policy? Well, that all depends on your particular case and your attitude towards risk. Nowadays, most lease contracts have a GAP clause built into the contract as it is required by law in some states, so you will want to carefully look over the fine print in order to determine if you need to get separate GAP insurance for your leased vehicle. For those of you that have purchased (or plan to purchase) a new car, determining the need for GAP car insurance is not so cut and dry.
My general advice is to assess the situation in which you will be operating the new vehicle. If you will be driving it everyday, have a long commute, and live in a neighborhood with a lot of traffic or high crime rate, then you will probably want to purchase this type of coverage to give you peace of mind. On the other hand, if you will only drive the car on the weekends, keep it parked inside at night, and won’t be using it to commute, GAP car insurance might not be a worthy investment. All in all, the decision is up to you and there’s no real right or wrong way to go. To compare rates for GAP car insurance coverage in your area, click here to get cheap Orlando auto insurance quotes from leading providers. Thanks, and be safe out there.
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