Why You Need GAP Insurance
If you have a vehicle, one thing you should definitely look into gap insurance. Because this isn’t a mainstream thing and not many customers have it it’s natural to have many questions that come to mind. So you may be asking yourself what is gap insurance, why do you need it, and the millions of other questions that come to mind.
Should bring some light on to what gap insurance really is, essentially it’s an optional add on to your existing insurance policy. Gap insurance covers you in the instance that if you’ve been in a car accident you will be covered for the outstanding amount owing on your vehicle.
So yes it can definitely help you out, but it won’t necessarily pay out your entire vehicle. Here are four circumstances where gap insurance is needed.
- You paid very little or nothing on your down payment to the vehicle
- You financing a vehicle for more than 60 months
- you took a loan towards your new car
- you lease a vehicle from the dealership
Many people have had that experience with are able to purchase the brand new vehicle that always wanted. Your body is filled with emotions oh, you’re driving it off the lot and boom Oh, you hit with that 20% depreciation. Nonetheless, it doesn’t take away from your driving experience and you still enjoy every single bit of it.
So say you’re a BMW fanatic and you purchase the all-new BMW M4 Competition. You saved up a lot of money and made the jump. Not only did you just buy the M4, but you also upgraded it with all the carbon fiber options you can dream of.
Now you’re given the situation of changes a little bit, you are told you have to move across the country to continue on with your military career. That isn’t too bad, you just have to have it shipped across to another country which is totally fine. Find out how you insure your car overseas here. But A Series of Unfortunate Events unfold where your vehicle has been destroyed during shipment.
So how does a scenario pan out? Well, think about it like this if you finance the vehicle I just put a small deposit right when you purchased it, the amount that you actually owe on the vehicle might actually surpass what its worth on the market. So think about it like this, you bought your M4 for $100,000, and now it’s only worth $80,000. So now you’re stuck in a position where your insurance company paid out the actual cash value, but you’re left with thousands of dollars you have to pay out-of-pocket for that vehicle you can’t drive anymore.
Scenarios like this is where gap insurance comes in. Like we said before gap insurance covers the amount owing after the actual cash value to pay it out. But keep in mind gap insurance doesn’t cover any unpaid Finance amount, lease amounts or excess mileage that you have to pay.
Now that you have an understanding as to what gap insurance covers and technically what it is. Do you think you should get it? Well, it is recommended for you to get gap insurance if you’ve recently purchased the vehicle, meaning in the first few years of ownership. But as a car gets older it becomes less and less important.
You can offer gap insurance at the dealership when you purchase the vehicle or you can get it through your insurance company. You will have to pay an increased amount each month but depending on the vehicle you purchase it can be worth it. But always remember the gap insurance is not a substitute for any mandatory insurance policies such as collision insurance or comprehensive insurance. It is additional insurance coverage that you can add on to your insurance policy.
It’s a great investment for anyone who just recently purchased a car simply for the peace of mind that you’re covered in case of any setback. Just remember if you’ve made a lump sum payment of over 50% on your vehicle you don’t necessarily need gap insurance, to assess your situation properly see what’s best for you.