Gap Insurance Warning: Don't Leave the Dealership Without It

Dreamed of buying that shiny new car? Well before you breath in that new car smell as you drive your brand new vehicle off the lot, you probably want to check into Gap insurance coverage for your dream car. The purpose of insurance is to protect yourself and your money, and Gap insurance is an important part of that.

Don't be fooled by terms like Full-Coverage and Collision insurance. They will cover many of your costs in the case of an accident, but hey will not cover the total loss of a new car.

What? You thought you were covered, right? Well, sort of. When a new car is driven off the lot it depreciates in value immediately by 20 to 30 percent. That is a pretty significant value. So, by the time you get your car home, the market value of your brand new, shiny $20,000 purchase is now worth $4000 to $6000 less than just a few hours ago.

Why is this value so important? Well, it is important, because comprehensive and collision coverage will only cover the market value of your car. This means that if you get in an accident within the first couple months you own your car where your car is considered "totaled," then you could end up being responsible for paying the difference between that market value and what you still owe. This means that you could still owe thousands of dollars to the lending company on a car you no longer have.

Gap insurance takes care of that depreciation value for you. This type of insurance would cover the difference between the loan amount and the market value of your car. It will cover mainly accidents and thefts, but not all auto insurance policies are the same, so you will want to look into the coverage closely.

If you want to purchase Gap insurance for your older car, your insurance company probably will not provide it. There are some insurance companies that will offer Gap insurance for your older auto, but most do not. It is usually reserved for new automobiles.

And many financing companies will not necessarily tell you about the need for Gap insurance. It is not a required coverage when getting financed. Most lending companies will require you to have full coverage, but not Gap insurance, so you would be stuck paying the depreciation difference if you totaled your new car.

However, leases usually come with Gap insurance built in. Lenders and dealerships usually will protect themselves. Do read over your lease, though, because each one varies, and you should make sure you are not going to have to pay added fees should something happen to the new vehicle.

To obtain Gap insurance you should contact your automobile insurance provider to see if they offer this type of coverage and how much it would cost. It will increase your premium,but it can also save you thousands of dollars in the long term. Plus, it offers peace of mind.

But what if your insurance does not offer Gap insurance coverage? There are other alternatives. Many dealerships offer Gap insurance. However, they will usually do so at an extremely high premium. So a better option may be to look into obtaining a policy through another insurance company that does offer Gap insurance.

Also, you don't have to keep Gap insurance forever. You only need to keep Gap insurance as long as the depreciation difference is significant. Once you have your car paid off, there is no gap between what you owe and what the car is worth, so you could opt out of this coverage once you feel comfortable.

Buying your dream car is a big deal. It is something exciting and an adventure. And you shouldn't have any other worries when driving that car off the lot except where to go to show it off. Gap insurance will provide you with peace of mind so having fun with your new car is a lot more enjoyable.

Gap Insurance Warning: Don't Leave the Dealership Without It

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