For car owners, one dreadful thing they try to avoid encountering is a vehicular accident. Still, if their car is insured, their provider will naturally pay for the damages. However, if their vehicle was acquired through a loan arrangement, some of the costs may have to be paid using their own money. This obviously includes payment for the remainder of their loan. In situations like these, applying for gap insurance becomes crucial.
Actually, gap insurance is a specialized car coverage type that causes confusion to some vehicle owners. As such, it needs some explanation before you can appreciate its true value.
Imagine yourself buying a new car worth $30,000 on loan. Upon taking this out of the dealership, its actual value immediately depreciates. Few auto owners are aware of this. Hence, when their newly-bought car meets an accident several days later, they get surprised upon knowing that their insurance will only pay the depreciated value of their car and not its actual value.
The problem lies in your depreciation cost. Assuming the depreciated value of your car goes down to $25,0000 from its original worth of $30,0000 after encountering an accident, you find yourself having a balance of $5,0000 in your hands; one balance which you will need to settle with your car dealer. However, if your car comes with a gap policy, this balance can easily be covered.
Based on the illustration above, it becomes clear that gap policies are designed only for newly-bought vehicles. This assumption is correct as the purpose of gap coverage is to help car owners meet their loan obligations despite having a useless vehicle after figuring in a road mishap.
Undoubtedly, gap insurance is one coverage type that new car owners should have. Yet, very few drivers apply for this protection plan. Part of the reason for this is its comparatively higher premium rate.
However, there are ways to go around this problem. Just like other coverage rates, you can significantly cut down your monthly gap premiums by having good driving records and keeping your annual driving mileage generally low. Observe these simple tips and you should be able to effectively demand for more affordable premiums.
Another sad thing about gap insurance is that drivers are not actually required to get them, unlike the more common insurance types. Still, you should try getting one especially if you have plans of buying a new or an additional vehicle. This should not be hard to do since many insurers are known to offer this coverage plan. Alternatively, you can look into your contract details and determine if this includes provisions for a gap policy.