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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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