When purchasing a new car, you’ll likely be offered gap insurance and asked if you want to add it to your payment. The answer to that question should be yes, and here’s why.
What is Gap Insurance?
Gap insurance is offered on any leased vehicle. In an accident where the car is deemed a total loss, the insurance provider will pay off the difference of the financial amount, excluding the deductible. For example, if you owe $5,000 on a car at the time of an accident, but it is totaled, and you have a $500 deductible, the gap insurance will cover the $4,500 difference.
Financial Security
Firstly, gap insurance provides financial security when you don’t have much extra money. The lender will want the balance due immediately if your car is totaled in an accident. This ensures they get paid and your credit doesn’t suffer.
Car Depreciation
One key thing to consider about cars is how quickly their value depreciates. Gap insurance will cover the difference immediately, so if you get into an accident shortly after buying the vehicle, it will cover it. The car’s value has likely dropped at least 10 percent, meaning you would be paying more for it than it’s worth.
Small Down Payment
Gap insurance is required for car buyers who put little to no down payment on a vehicle. Your down payment will not cover the difference in the car’s value at the time the car is totaled. This means you’ll have a significant out-of-pocket difference that will need to be paid.
Contact us today if you’re in the Manchester, CT, area or surrounding communities looking for auto insurance. Our Brent Young Agency LLC team is ready to assist you with your insurance needs.
