Gap Insurance Policies

Gap Insurance is a vital kind of coverage needed when leasing or buying a brand-new vehicle. This coverage pays for the difference between the balance of your loan or lease payments and the market value of your automobile because of depreciation. Consumers are typically recommended by insurance experts to purchase gap insurance in case their vehicle is considered a total loss. Gap coverage will also cover vehicle damage which results from accident, theft, flood, fire, vandalism, tornado, and or hurricanes.

 

Gap Insurance policy is valuable, in the event an automobile is damaged or stolen after the purchase and the vehicle had only comprehensive and collision coverage purchased, this comprehensive and collision coverage would only cover the vehicle's market value which may be different from the loan balance. Leaving the outstanding balance to be paid.

 

Consumers may think their new automobile has a lot of value with absolutely nothing to worry about especially because an owner may assume that his or her comprehensive and collision coverage offers total protection in the event of lost. However, purchasing a brand-new vehicle without gap insurance policy can be a significant oversight.

Gap Insurance

 

In the event of a total loss, the vehicle's owner may not realize how large of a gap that would remain in the absence of gap insurance coverage, and he or she might be personally accountable for thousands of dollars owed to the lien holder of the vehicle. This cost is because a new automobile might lose several thousand dollars in value the moment it has driven off the dealer’s lot. And additional cost such as titling, taxes and other fees are financed in the loan or lease balance marking up the balance owed to lien holder above the market value of the vehicle.

 

When a consumer buys a vehicle using loans or leases, their vehicle may be covered by a form of gap insurance coverage. This type of gap insurance policy covers the difference or gap between balance owe on your car to the lien holder and the cars actual market value.  However, the amount loan or lease coverage it provides may be a percentage of the vehicles market value which may not be enough to cover the total balance owed.

 

Therefore it is important to carefully review your leasing contract to ensure it includes gap insurance and if needed you can add the required additional gap insurance to your auto insurance policy. To purchase gap insurance take a moment to compare the vehicles market value and its book value against the vehicle’s loan balance and see if additional coverage may be needed. Extra coverage can then be added at additional cost. After gap coverage is secured on your regular auto policy be sure to monitor your loan balance against vehicle balance. 

When the loan balance is not above the market value and then cancel the gap insurance coverage when it is no longer needed.