There is a lot to familiarize yourself with when it comes to auto insurance. Just another term that many are unfamiliar with is gap car insurance, which is a must-know term when leasing. And if a small down payment was made when you bought that new car, this is a term that can save you years worth of headaches.
Gap auto insurance essentially closes the gap between what your insurance company will pay if your car is stolen or totaled and what you will owe. Far too often people fall victim to the belief that their insurance company is going to cover you during the most horrendous of times. WRONG!
If you get into an accident and total the vehicle, your insurance company is going to cover only a certain amount leaving you liable for the rest. And as soon as you drive the vehicle off of the lot, it depreciates in value. But finance companies don’t care as they want the full amount while insurance companies only pay the value of the car before you were involved in an accident.
And if you buy a vehicle without putting a large amount down, you will likely owe more than the insurance company is willing to pay if the vehicle gets totaled or stolen. Fortunately, this is where gap auto insurance will come in and save the day.
Typically, gap insurance is ordered by lease contracts or simply included within them. The question on everyone’s mind is whether or not this is a necessity. Of course, it depends on the driver and their situation. If your insurance policy will pay off the fully financed amount, then it is a pointless cause. If not, it is certainly worth looking into.
There are a few things to think about though as you consider gap car insurance. First, keep in mind that some insurance companies will sell you gap policies any time during the lease term, not just when the lease is initiated. Second, it is important to remember you must be in compliance with all terms of the lease.
Lastly, your gap insurance policy may not be honored without collision and comprehensive coverage. This is where it becomes important to speak with a representative and find out exactly where you and the company stand.
There is a lot to consider when purchasing car insurance and gap insurance is just another factor to throw into the equation. But at the end of the day, know that it can save you greatly in the years to come.