What Is Gap Insurance And Why Might You Need It?

What Is Gap Insurance And Why Might You Need It?

July 31, 2020 Insurance 101, Protecting Investments

While regular car insurance helps protect your new vehicle against accidents and fender benders, it doesn’t cover worst case scenarios. That’s where gap insurance comes in. If you purchased your car with an auto loan, gap insurance helps pay the difference on the depreciated value of your car in the event that it’s totaled or stolen. Having gap insurance in addition to your existing coverage can save you money and help pay off your loan if the worst happens.

Why Might You Need Gap Insurance?

A vehicle’s value generally depreciates about 20 percent during your first year of ownership. If you’re leasing your car or purchased it with financing, most lenders require owners to have collision or comprehensive coverage until your vehicle is fully paid off. However, if your car is stolen or totaled, collision coverage and comprehensive coverage covers only the cost of the vehicle up to its depreciated value, leaving you to cover the rest of the loan. But gap insurance works with your existing coverage, helping you cover the total cost of what you paid for the vehicle.

What If I’ve Already Bought My Car?

Depending on the model year of your car, you may still be able to purchase gap insurance even after you bought your new vehicle. That’s because gap insurance isn’t just sold at auto dealerships. It can be included as part of a car insurance policy and oftentimes you’ll save more money than buying it at a dealership.

Should I Get Gap Insurance?

Gap insurance is often only available if you’re leasing or financing a new vehicle. But if your loan is 60 months or longer, you’ve made less than a 20 percent down payment on your vehicle, are paying high finance charges or are leasing your car, gap insurance might be worth the investment.

Whether it’s gap insurance, comprehensive coverage or a new auto policy, SFM Insurance has you covered. As an independent insurance agency, we represent 16 well-known brands, which means you have more options to find the policy that’s right for you. Contact us today for a free consultation and talk with our experts. For more tips and our latest updates, visit us on Facebook, Twitter or LinkedIn!