Life is all about ups and downs. Stocks, temperatures, even elevators go up and down. One major exception to the rule, however, is the value of cars. From the second you drive it off the lot, its worth goes down and it isn’t ever climbing back up.
But what happens if you owe more on a car than it’s actually worth? Well, you better hope you have gap insurance.
Can I buy it at the mall?
No, not that kind of Gap. In insurance terms, gap insurance covers the difference between what you owe on your vehicle and what its cash value is. These days, there are so many convenient financing and leasing options with longer repayment terms and lower monthly payments, but you could easily find yourself in a situation where you owe more on a car than it’s really worth. But by having gap insurance when you get into an accident, it’ll literally cover the gap between the two.
Real World Example
Put on your creativity cap for a minute and imagine you get into an accident. You’re fine, but your car was not as lucky. It’s totaled. If you owe $18,000 on the car, you still have to pay that to the bank or leasing company. Your insurance company will reimburse you for the actual value of the car, say $15,000. But who pays for the $3,000 difference? If you have gap insurance, we’ll pay the difference! And if you don’t have gap insurance, you better hope that money tree in your backyard is in season because getting into an accident is not cheap.
That Sounds Pricey
It’s really not! The cost of this endorsement is only $30/year per car. And trust us, this is often MUCH less expensive than purchasing gap insurance through a dealership. So go ahead and call your local, independent insurance agent to add it to your policy today!