Gap insurance is a very practical way to protect yourself from paying out tons of cash on your newly bought automobile if you were to get into an accident and total your car. Basically, when you look at from the point of view of the car dealership where you bought your car, although your car was wrecked and you can no longer drive it, you still owe the dealership the money for the car. What gap insurance does, is it covers the rest of the money owed on the car so the owner doesn't end up with a bill for thousands of dollars for a car they can no longer drive. In a nutshell, gap insurance covers the difference between what is owed on the car and what the car is actually worth.

The best way to understand this is to acknowledge that manner in which cars depreciate in value as soon as they have been driven off of the lot. The number one thing to remember about gap insurance is that it will only come into effect if your car is stolen or if it is totaled beyond repair. If either of these things happens then the gap insurance will then cover the difference between what the car is worth now (after you have driven it off of the lot), and what you currently owe (because you may owe more money than the car is worth).

Ultimately, the choice of buying gap insurance lies with the purchaser of the vehicle, but usually it will cost a couple of hundred dollars and could end up saving you thousands if something unfortunate might happen. Although it is not necessary, you can definitely see how one could benefit from the gap insurance if they had bought a car with a small down payment and ended up totaling the car or having it stolen within 6 months of owning the car. It is never easy to think about your brand new car being totaled in an accident, but it is better to be safe than sorry when it comes to something as expensive as a new automobile. Gap insurance provides the owner with a little peace of mind about what will happen in the worst case scenario while being surprisingly reasonable in price, which is why there are many people that opt to buy the insurance and protect their investments.