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Should I Get Gap Insurance?

Gap Auto Insurance Add comments

I bought a new car recently. Should I consider getting GAP insurance? How does it work?

Gap insurance is something you might want to consider if you have financed or leased your vehicle, and will provide you with very valuable protection by bridging the gap between what your regular auto insurance company will pay you for your vehicle and what you owe on the vehicle loan in the case of an accident or theft. This type of insurance will provide you protection against accident, theft, flood, tornado, fire, vandalism, or hurricanes. Typically, insurance companies will only offer the cash value of your car not the retail value which can cause problems if you owe more money on the loan than the insurance company is willing to give you.

Let’s say for example that you buy a new car for $30,000 with no down payment, and 9 months later you get in to a car accident and total your car. At this point you owe $27,000 on the car but your insurance company only wants to give you $25,000. Gap insurance would pay that additional $2,000 for you so you don’t suffer any losses. Some gap insurance policies will even pay the deductible for your regular auto insurance so you don’t have to.

Gap insurance is definitely something you should consider to protect yourself financially. Most auto insurance companies do provide gap insurance, so you might want to ask your current insurance provider about getting a gap insurance policy set up.

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