Is Gap Coverage For You?
You may have heard about automotive gap insurance, and what you heard may have left you wondering if that sort of coverage is necessary for you. There are a few questions you should ask yourself to determine whether or not this sort of policy is beneficial - or a waste of money.
Are you driving a brand new automobile? If so, you would be wise to consider gap insurance for a couple of years. This kind of coverage is designed to make up the difference between the actual cost to replace your new car or truck and the amount you would be reimbursed for comprehensive or collision damage by a typical auto policy. Brand new vehicles lose a lot of value simply driving off the lot for the first time, so you want to make sure that if something happened to your new baby right away, you would be able to replace her with a new auto, rather than a used one.
Is your car leased or on loan? Leased autos sometimes have a gap coverage requirement, and you may want to consider a similar policy if the title to your car, truck, or SUV is owned by a bank or other lender. You should keep in mind that if the vehicle is totaled in an accident and your existing policy does not reimburse you for the remaining value of your loan, you will still be expected to make payments until the difference is recovered. No one wants to pay for a car they cannot even drive!
Aside from those basic scenarios, you probably do not need gap. Remember, also, to regularly compare the reimbursement value on your vehicle's main insurance policy with the replacement cost or remaining loan on the car. Once those two figures line up, you can drop the additional coverage and save more money!