Gap insurance is a coverage that takes care of the difference between an insurers’ assessed value of your car and the actual amount owed from a dealership. Once you roll out your brand-new car onto the street outside a dealership, its value already depreciates. If you meet an accident a few minutes after that, heaven forbid, the insurance company will not cover this depreciated amount anymore.
With that said, gap insurance is usually not available for older cars. It is designed so that in case a newly-purchased car is totally wrecked in an accident, a policyholder will still be able to pay-off the difference to an auto merchant. Without this coverage, you, as the car owner just might owe some money for a vehicle that is already totally useless. For example, you purchased a car for $30,000, the amount you need to pay off, amortized over a period of time, and the depreciated cost is $25,000, the maximum amount which a policy will cover for collision. You meet an accident and the vehicle is beyond repair. Gap will take care of the $5,000 difference so you can still pay-off your loan balance.
Gap insurance is not a required coverage, but it will prove to be helpful in the freak event that your car becomes totally damaged. Your full and comprehensive coverage will never take care of that amount you owe the bank or dealer. This type of coverage will lift the burden off your chest and pockets, and will allow you to move on and forget about misfortune. This is like expecting residual costs and being ready come what may. This coverage, like all other kinds of policy, is an investment for the future, something that every car owner needs to strongly consider.
Since gap insurance is a somewhat specialized type of auto insurance, the premiums can get pretty expensive. However, you can get around that by taking your time and comparing rates offered by various insurance companies. Remember that your rate may be different from all others. If you know that you are a responsible driver with little or no traffic violations and that your annual driving mileage is low, expect to get competitive rates.
If you are using a leased vehicle, this coverage is most likely included in the full insurance policy. Before signing the lease contract though, make sure that gap is included. If it is not, find an agent who will help you get covered. It is for your own security, relieving yourself of the worry that is usually associated with repair costs.