What is Gap Insurance? - September 29, 2008
Gap insurance insures you for the difference between your loan amount on the car and the actual market value of the car. This insurance is a must for someone who is considering purchasing a new vehicle since a new vehicle depreciates right after it is driven off the dealer’s lot. In most cases, the value of your car plummets, by as much as 20%-30% once it leaves the dealer. So if you get into an accident, even with full insurance coverage, you’ll only receive the market value of your vehicle which will be lower than your purchase price. That means you’ll have to shoulder the difference. Gap insurance, covers the difference between your loan amount on the car and the car’s actual market value. Some insurance companies may not offer Gap insurance, so before deciding to purchase your new car, check with your current insurance provider about Gap insurance. If it’s not included in the premium, you may want to purchase Gap insurance for a reasonable additional cost.