What is gap insurance and why do I need it?
If you are currently in the car-buying process, you’re most likely considering everything from the total and monthly costs to how well it will retain its value over time. Unfortunately, no matter which car you select, its value will start to depreciate the second you drive it off the lot. This is where gap insurance comes in. It helps to protect you if you ever owe more than your vehicle’s worth at the time.
Simply put, gap insurance is the difference between what your vehicle’s actual cash value (ACV) is versus how much you currently owe. In the event of a covered total loss, we will pay the difference for you if there’s still a balance on your bank’s auto loan or lease.
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, if you have gap insurance and get in 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 do! 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! And if you get a quote from your local, independent agent, it can often be MUCH less expensive than purchasing gap insurance through a dealership. So go ahead and call your agent to add it to your policy today!