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Do You Need Gap Insurance?

Author: John Smith  //  Category: auto insurance tips

If you have a loan or lease on your car, you may want to consider purchasing Guaranteed Auto Protection (GAP) insurance. GAP insurance pays the difference between the balance that is left on your loan or lease and the actual cash value of the car should an incident occur. If your car is totaled for one reason or another, your insurance company will typically only pay what the car is actually worth. Your loan or lease is more than likely a much higher amount than what the insurance company is willing to pay you, which is where GAP insurance can provide a benefit.

What GAP Insurance Covers

GAP insurance covers most incidents that could possibly finish off a vehicle. Theft, vandalism, accidents, fire and most natural disasters are covered by GAP insurance. GAP insurance typically does not cover cars that are not protected with collision and comprehensive insurance. It does not cover losses related to market equipment, extended warranties, overdue payments or security deposits for leases. Those losses will have to be your responsibility to cover.

When To Consider Purchasing GAP Insurance

If you have purchased or leased a new or used car that has a significantly smaller actual cash value than your loan or lease, you should consider getting GAP insurance. Most people cannot afford to buy a new car if a current vehicle is damaged beyond repair. Also, many people do not realize that if their car is totaled and the insurance company only pays for the actual cash value of the car, they are still responsible for paying off the loan, although they have no car to drive. You can avoid this uncomfortable situation by getting GAP insurance.

Where to Obtain GAP Insurance

There are two main ways for you to get GAP insurance. The first is through the insurance company that you currently use for your insurance needs. You can call the company and ask them if they offer GAP insurance. It is important to take the time to find out exactly what is covered by the policy. Be sure to ask the agent to send you a written copy of the insurance policy so that you can refer to it should a situation arise. The second option for obtaining GAP insurance is from the dealership where you purchased the car. Many dealerships offer GAP insurance coverage, but you may pay a bit more for it than you would from a private insurance company. It is important to call your insurance company before signing up for GAP insurance from the dealership so that you can be sure you are getting the best rate possible.

Although GAP insurance is not necessary for all drivers to purchase, those who are good candidates for this type of insurance may find the investment to be a money saving money practice in the event of a collision. Keep in mind that GAP insurance is issued as a supplement to standard automobile insurance. It does not take the place of an auto insurance policy in either the short-term or long-term.

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