By Alan Rochford
When people look for affordable car insurance, they usually search for standard coverage against damage to other people's vehicles and their own. But have you ever considered gap insurance? This is probably a more important investment than you realize, protecting the full value of your car while you're still paying it off.
A Gap Insurance Definition
When you purchase a car, its value goes down almost instantly. This isn't usually a huge problem as long as you've already paid off the car. However, if you purchased it on finance and still owe money, you could be left short in the event of an accident. Gap insurance is designed to cover the gap between what your insurer will pay out on a totaled car, and what you still owe on finance.
The Circumstances In Which Gap Insurance Is And Isn't Necessary
Note that gap insurance coverage isn't needed in all cases. There are two different circumstances in which it is definitely necessary, however: 1) You're leasing the car and have an agreement that states you are responsible for the value if it's stolen or totaled. 2) You bought the car on finance and owe more on the car than it is worth now.
Why is it so important in these two circumstances? Put simply, the gap can be quite big. You could end up losing a lot of money that you can't afford to lose. Gap insurance means you don't have to worry about taking such a big financial hit.
On the other hand, there are occasions where gap insurance coverage isn't really necessary. That is, if you paid most of the cost upfront so that your outstanding payments are worth less in total than the value of your car. In other words, if there's no shortfall between the amount outstanding on the car, and the amount insurance would pay out for it, you don't need this type of coverage.
How To Choose The Best Gap Insurance Cover
As with the search for any kind of affordable car insurance, it pays to shop around. When looking at gap auto insurance policies specifically, you should also take a close look at their terms. There are usually restrictions on the age of the vehicle and you'll only have a short period time after buying the car in which to take up this kind of insurance. Make sure you do, though, as you could end up losing a lot of money if you don't!
A Gap Insurance Definition
When you purchase a car, its value goes down almost instantly. This isn't usually a huge problem as long as you've already paid off the car. However, if you purchased it on finance and still owe money, you could be left short in the event of an accident. Gap insurance is designed to cover the gap between what your insurer will pay out on a totaled car, and what you still owe on finance.
The Circumstances In Which Gap Insurance Is And Isn't Necessary
Note that gap insurance coverage isn't needed in all cases. There are two different circumstances in which it is definitely necessary, however: 1) You're leasing the car and have an agreement that states you are responsible for the value if it's stolen or totaled. 2) You bought the car on finance and owe more on the car than it is worth now.
Why is it so important in these two circumstances? Put simply, the gap can be quite big. You could end up losing a lot of money that you can't afford to lose. Gap insurance means you don't have to worry about taking such a big financial hit.
On the other hand, there are occasions where gap insurance coverage isn't really necessary. That is, if you paid most of the cost upfront so that your outstanding payments are worth less in total than the value of your car. In other words, if there's no shortfall between the amount outstanding on the car, and the amount insurance would pay out for it, you don't need this type of coverage.
How To Choose The Best Gap Insurance Cover
As with the search for any kind of affordable car insurance, it pays to shop around. When looking at gap auto insurance policies specifically, you should also take a close look at their terms. There are usually restrictions on the age of the vehicle and you'll only have a short period time after buying the car in which to take up this kind of insurance. Make sure you do, though, as you could end up losing a lot of money if you don't!
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