Should I have GAP Insurance?Nov 29th, 2021
So, you’re not sure if GAP insurance is right for you—or even what it is. If this sounds like you, don’t worry— you’re not alone. GAP insurance is optional in most cases, so many folks may be unfamiliar with the term. In short, GAP insurance helps you fill in “the gap” of your auto loan in case the worst should happen to your vehicle.
What is GAP insurance?
GAP insurance is an optional type of car insurance coverage that helps pay off your auto loan in the unfortunate event that your vehicle is totaled or stolen, and you owe more than the car’s depreciated value. This type of coverage is only available if you’re the original loan holder on a new vehicle. To summarize, GAP insurance helps by paying the gap between the depreciated value of your car and what you would still owe on the car.
Should I consider getting GAP insurance?
It would be a good idea to consider buying GAP insurance for your newly purchased vehicle if you:
- Leased the vehicle (carrying GAP insurance is often required for a lease)
- Purchased a vehicle that depreciates faster than the average
- Made less than a 20 percent down payment
- Financed for 60 months or longer
If you’re considering buying GAP insurance, it’s important to remember that this type of coverage may only be available if you’re leasing or financing a new vehicle. Then, think about how much you owe on your auto loan versus the value of your car. Do you owe more than your car is worth? Could you afford to pay the difference out of pocket if your car is totaled or stolen?
Now you understand GAP insurance and will be able to make the right choice for you and your new vehicle. Let us know if this has helped you!