Guide to Gap Insurance: Do You Really Need It?

One of the oldest sayings that the world has ever known is “How can we get more?” Today, it seems that there are more insurance companies subscribing to this way of thinking than ever before, generally to the detriment of consumer’s wallets. Now, there’s a new deal out there: gap insurance. Just what is gap insurance, you ask? You might get offered gap insurance while you’re signing the paperwork on your new car (or used car) and while the salesperson you’re working with might just make quite a case for your purchase of gap insurance, you need to personally be aware of its pros and cons before committing to the purchase.

First off, what is it exactly that gap insurance covers? That’s an easy question. Gap insurance covers the difference in value between what you owe on the vehicle, and what the vehicle is worth. Hopefully, you’ve worked out a good deal on the car, and what you owe is substantially close to what the car is worth in the first place, rendering gap insurance unnecessary. If, however, you find yourself in ownership of a vehicle worth considerably less than what you owe on it, gap insurance might be a good idea. In the event of an accident that results in the total loss of the vehicle, insurance companies will pay you the actual cash value of the car. This might also be known better as “Bluebook value,” and is determined by the condition of the vehicle pre-accident, mileage, and of course, the make and model of vehicle. You won’t get any more for it, regardless of how good your insurance is. Although you will get a really good settlement amount in case you hire baltimore car accident attorney to represent you. But the problem with Gap insurance is that you get tons of terms and conditions that can work against you. This is why before you purchase a Gap insurance make sure that you go through all the regulations. 

Is gap insurance a good value? For this question, you need not only some insight but a little bit of fortune-telling ability, as well. You need to give consideration to just how much the gap insurance is going to cost you. Will it be an additional $5 per payment for the life of the loan? While that might not sound too bad, consider that by the end of a 60-month loan, you will have paid an additional $300 for something you may or may not use at all, and which was only really useful during the first three years of your vehicle ownership. (This presuming that at the mid-way point of the loan, you have paid enough on the car so that the balance of your loan is less than the actual cash value of the car.) Once you’ve eclipsed that point, will you still be paying for what you won’t be using?

Good options if you feel you must have gap insurance are to avoid the insurance sold by auto dealerships as tack-on sales. Go through your insurance company to get the best rate possible, and avoid any difficulties that might ensue from having two insurance companies to deal with. Remember to negotiate for the lowest possible rate, and make sure that the gap insurance will cover the amount of your deductible, as well. Finally, remember that gap insurance is not compulsory in any state, you can decline that coverage. On the other side of that, if you do drive off the lot and total your car five feet from the front entrance, you’ll be paying out of pocket for the difference.