Do you know what gap insurance is and if it’s something you need?
Unfortunately, many people don’t even think twice about this important decision, but learning more about gap insurance can save you from potential disasters down the road.
With just a few simple tips, we’ll help explain what gap insurance is, why it’s so important for drivers today, and of course — how to figure out if you already have coverage in place. Let’s dive in!
WHAT IS GAP INSURANCE?
Gap insurance provides you with additional protection in case your car is totaled or stolen. If your insurance provider declared your vehicle a total loss, gap insurance will cover the difference between the actual value of your vehicle and what you still owe on it.
What Does Gap Insurance Cover?
Gap insurance covers the “gap” between your auto loan or lease balance and the current market value of your vehicle, should it get totaled or stolen.
For example, if you owe $20,000 on a car that has depreciated to $15,000 due to age or wear-and-tear, gap insurance will pay up to $5,000 to help you pay off the remaining balance. Without gap insurance, you’re responsible for paying off the entire loan amount, even when your vehicle is no longer driveable.
Where Can I Get Gap Insurance?
Depending on what car insurance company you use, you can purchase gap insurance through your existing insurer as an add-on or separately through your auto lender. Before signing up for any coverage, ensure you understand exactly what’s covered and what isn’t in case of an accident.
Some policies will cover only certain types of accidents. In contrast, others may provide more comprehensive coverage — so it pays to read the fine print carefully before signing up for any policy.
How Do I Know If I Already Have Gap Insurance?
To determine whether you have gap insurance already included in your policy or loan agreement, check both places first to determine where it comes from — either from your insurer as an add-on or from your lender as part of their loan agreement.
Your insurer should be able to tell you whether they offer this type of coverage and at what price, while your lender can provide information regarding the terms of their loan agreement. Be sure to ask all relevant questions and read all documents thoroughly, so there are no surprises down the road!
Do I Have To Have Gap Insurance On My Car?
Gap insurance is often offered as an endorsement to your auto insurance policy to help cover the difference between what you owe on a financed car and the amount your car is worth. If your vehicle is totaled after an accident, gap insurance will pay for the difference between what your insurer pays out and what you still owe to the lender.
Knowing if you need gap insurance can be confusing, so let’s break down how to determine if you need it.
DO YOU NEED GAP INSURANCE?
Understanding your car loan is the most important factor when determining if you need gap insurance.
When financing a vehicle, it’s important to note that the actual value of your car depreciates over time and may be less than what you actually owe on it. This means that if there was an accident or theft, you might have difficulty covering the remaining balance on your loan.
That’s where gap insurance comes in — it covers the difference between what you owe and what your insurer pays out for repairs or replacements.
Do You Have a Lease?
Leasing companies typically require gap insurance since they take ownership of the vehicle until you make all payments. This means that when leasing a car, you should always consider gap insurance, ensuring you cover all payments should an accident occur.
If you own your car outright or have paid off most of its value, then gap insurance may not be necessary for you, as it’s unlikely that any outstanding balance will be left unpaid in case of an accident or theft.
Gap insurance can provide invaluable protection against any unexpected events while driving or owning a car. Understanding whether you need this type of coverage requires knowledge of both your loan agreement and the value of your vehicle.
While having gap coverage may not always be necessary for those who have paid off their cars or who own them outright, it’s certainly something worth considering when financing or leasing a new vehicle to protect yourself against any potential losses because of accidents or theft.
So, there you have it: a quick and easy overview of what gap insurance is, how you can tell if you have it, and whether you really need it. As always, be sure to do your own research and talk to your agent before deciding about your coverage.
If you need help finding the best car insurance coverage for the best price, start by speaking to a SimplyIOA agent at 833.872.4467 or get an auto insurance quote online now.
