The purchase of a new car comes with a great deal of responsibility on the part of the driver. In addition to the financial commitment involved with making monthly car payments and maintaining the overall condition of the vehicle, the need for auto insurance also arises. However, in many cases, basic coverage isn’t enough to fully protect one’s investment. This is why car owners should also consider obtaining a gap insurance policy in order to better protect their vehicle. The purpose of gap insurance, once known as guaranteed asset protection, is to insure the difference between the fair market value (a vehicle’s worth as deemed by the insurance company) of the car and how much the individual owes on it.
Many car owners question the need for gap insurance, as they are often hesitant to purchase extra coverage due to high premiums already set on their basic car insurance policy. The truth is gap insurance is just as important and necessary for drivers to purchase. Surprisingly, most people are unaware of the fact that once their new vehicle leaves the car lot, the value depreciates by as much as twenty percent! Additionally, if their new car gets stolen or is totaled in a wreck early on after their purchase (usually within the first year), they are still responsible to pay off a large portion of their loan, even if they had comprehensive car insurance. This is where gap insurance can step in to save the day.
Similar to other types of insurance, gap insurance is not required with the purchase of a car. However, without gap insurance, car owners leave themselves vulnerable to suffer financial losses. Some specific situations that can prompt individuals to purchase gap insurance include the following:
- Gap car insurance can often be required in a leasing contract, as it’s necessary for the leasing company to have guaranteed compensation in the event the vehicle is stolen, or is involved in an accident.
- This type of auto insurance is also necessary for individuals who are purchasing a new car. This is because there is a higher risk of theft with newer automobiles.
One of the greatest features about gap auto insurance is the fact that it’s made affordable for new car owners. However, many people are still uninsured with gap coverage due to their lack of knowledge of its existence, as well as scarcity of the product in several states including the following:
- Nebraska
- New Hampshire
- New York
- New Mexico
- Virginia
- Washington
The good news is that drivers residing in states where gap insurance isn’t sold can make attempts to push for it by petitioning their state insurance department. However, before individuals inquire about insurance rates, or even obtain insurance quotes for gap coverage, it is important to be aware of a few significant factors:
1. Different Policies
While most gap insurance policies provide coverage for losses due to theft and accidents, not all gap insurance policies are the same. This is why it’s important for individuals to ask specific questions about what is included under the gap insurance policy before making the purchase.
2. Availability
In many cases, gap insurance is not available for older vehicles. Therefore, the policy may only be necessary for individuals who are purchasing new cars, as added security helps to protect their investment.
3. Insurance through Dealerships
It may be possible for individuals who finance the purchase of their vehicle through a dealership to obtain a gap insurance policy as well. However, the cost for coverage is usually more than it would be if purchased through a traditional auto insurance agent.
4. Check Existing Policy
Although it’s rare, sometimes gap insurance coverage can already be included within an individual’s auto insurance policy. This is why it’s important to do research, as additional gap coverage may not be necessary.