The difference between what your vehicle is worth and the amount you
owe on the vehicle is covered by gap coverage. When people finance
their vehicles, some lenders require that the borrower purchases gap
coverage, but some do not. Gap coverage will kick in if your vehicle is
totaled or stolen when you are still paying on your auto loan.
Gap Coverage For Buyers
If you purchased a vehicle, gap coverage makes sense if you expect to owe more than the vehicle is worth. If you put a small down payment on the vehicle, if the vehicle is depreciating quickly, or if your interest rate is very high, gap coverage is a good option for you. People that put down a lot of money on their vehicles do not usually need gap insurance.
Gap Coverage For A Lease
If you are leasing your vehicle and it gets totaled or stolen, you will be responsible for the costs. Lease payments are usually low, so the difference between what you paid on the lease and your vehicle's value can be significant. As a result, gap coverage is usually required on lease contracts.
What Gap Coverage Costs
Gap coverage is available for a sensible price. It usually costs $100 or about 4 percent of the vehicle's sticker price. If you want to purchase gap coverage, contact your insurance provider. Find out if they offer it and what they charge for the extra coverage. If you are not sure if you should purchase gap coverage, contact your insurance provider or an insurance agent that offers this kind of coverage. Furthermore, keep in mind that many dealer's offer gap coverage when people purchase vehicles. You can discuss gap coverage with your dealer, but it will probably cost you more money than if you purchased it through an insurance company. If your insurance provider does not offer gap insurance, you may want to consider searching for a new provider or an older car.
Review Your Policy
You find out what gap coverage will cover when you contact insurance companies. If you already have the coverage, make sure you review the policy carefully if you are not sure what it covers. Typically, gap coverage will cover accidents and theft.
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