Understanding GAP Insurance

Open RoadIf you owe money on your car – and who doesn’t, these days? – you might want to look into GAP insurance. This insurance covers the ‘gap’ between what the car is worth (what you owe on it) and the value that the insurance company will place on it if they total it out. In other words, if you owe $15,000 on your car and it’s totaled in a wreck, the insurance company might pay you $10,000 as the value of the car. That leaves you owing $5,000 on a car you don’t even have anymore. If you have GAP insurance, though, you don’t have to worry about that, because the GAP insurance will pay the extra $5,000. You won’t have a car, but you won’t owe anybody anything, either. That leaves you free to buy another car.

When the amount you owe on the vehicle is equal to or below the value that the insurance company places on the car, the GAP insurance can be cancelled at your request, since you’d then be paying for something that wouldn’t give you any benefit.

GAP insurance isn’t a requirement, either, so you don’t have to buy it if you don’t want to. It’s usually very inexpensive, though, so a lot of people choose to get it just as an added measure of protection. It will most likely be offered to you when you buy a new car, along with extended warranties and all kinds of other things. Choose carefully.

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