Many people believe that the scariest thing that could happen to their vehicle is that if it becomes a complete and total wreck, even before they are done paying up for it. This is the main reason why drivers often get really nervous and anxious when driving down a busy highway, especially with a newly-bought car. This anxiety is understandable though especially if a driver did not take advantage of gap insurance.
No matter how new a car is, it is destined to undergo one thing that all other vehicles on the road went through: depreciation. Once a vehicle is driven out of a dealership, its value starts to sink little by little. After three months, the car would only cost 20-30% less of its original value. Getting a value quote from an insurance company will help determine just how much depreciation a vehicle has undergone. Finding out the details might be surprising. Knowing the actual value of a vehicle would definitely cause any owner to be anxious about getting into accidents since payment for damages could become more expensive than the actual value that the driver paid for getting the car.
Incidences like theft, fire or flood could result in total or complete damage to a car. This can also cause plenty of problems, especially if payment has not been completed yet. The insurance company will take the depreciated value and provide the car owner with an amount lesser than what the car actually costs. Because of this “gap,” the owner would have to pay for the difference between actual cost of the vehicle and its depreciated value. This is the main reason why gap insurance would be helpful to have.
Gap insurance works by covering or paying for the difference in price and depreciated value of a vehicle in case it gets totaled or seriously damaged. The price difference is not something that normal insurance companies would cover. However, some insurance providers incorporate and offer this type of insurance for their clients. Of course, there are times when a driver would not need this insurance like in cases where the owner gets a used vehicle since paying for insurance might cost more than the price of the vehicle.
At the same time, gap insurance is the perfect move if a person gets a brand new vehicle. When buying a new vehicle, dealerships usually offer an option to get gap insurance. Make sure to ask about it and find out the details. It would definitely be a big help before driving out of that dealership with a new ride.