Many insurance agents recommend car owners to get gap insurance. It fully covers the market value of a car if it gets damaged or if it must be replaced. So for example, if a vehicle gets damaged beyond repair, the insurance will reimburse the original cost of the car at the time it was bought, and not the present value of the car. This sounds very ideal to a lot of car owners. However, the high premium makes them settle for another type of insurance policy.
Gap insurance indeed sounds like a very good deal but it also has its disadvantages. This is often just recommended to those who purchased brand new cars. Calculate the cost of premium versus the cost of gap (market value minus the present value of the car) and see if it amounts to something significant. Will it be worth the heavy monthly expenses you will pay or will it just be a heavy slice on your budget?
Consider price fluctuations. With a globally disturbed economy, the prices of commodities rise and fluctuate daily. It is the same with the market value of vehicles that changes constantly. It is very difficult to assess if you are really being able to save money from your premium insurance or not.
Think of the long term situation also. Most drivers tend to forget after a while that they signed up for gap insurance and forget to change it. It loses its value after sometime especially once a car starts depreciating. A driver should play his cards well by knowing what type of insurance to get depending on the situation, and when to cancel insurance if not needed anymore.
Another disadvantage is the vague and insufficient terms stipulated most of the time in gap insurance policies. Whereas it should totally cover the full value of the car if the policyholder will file for a claim, most often though, the policy itself is misleading. Hence, it is important that motorists also make sure that they are getting what they pay for.
Look more closely at what you are trying to purchase and be meticulous. The descriptions could be very attractive but remember that agents are trying to make a sale. When you go home and assess things by yourself, there is a lot more you can analyze. The key is to calculate wisely.
Do not look at the premium rates offhand. Also consider the risks and possibilities involved. Assess your actual financial capacity. Can you really afford gap insurance? There might be better alternatives more fitting to your budget. Try to calculate also the probability of getting into an accident versus the cost of insurance.