Buying Gap Insurance for Your Vehicle

ByTom Ando

What is gap car insurance and how does it affect your coverage level? Gap insurance, which is sometimes referred to as "totaled insurance," covers the loan amount of your vehicle if it is totaled and your car's actual cash value. This type of insurance is almost always a requirement during the purchase of a new vehicle because it depreciates after it has been driven from the dealer's lot. It is also a requirement for leased vehicles because there is almost always a gap in what a person owes for the lease if the car is totaled and the amount that the insurance company will pay.

If you have a used car you may also benefit from purchasing "totaled insurance." The following are a few examples where gap insurance would be required:

• If you decide to trade in your car for a newer model gap insurance could come in handy. For example, if you trade in a vehicle that is 6 years, while still owing money on it, for a newer model that is 2 years old, your existing loan would get rolled into the new car payments. This would make your loan for the newer 2-year-old vehicle higher than the actual worth of the vehicle. In this instance purchasing gap insurance would be smart because it would cover the difference between the loan amount and the actual cash value of the car in case of an accident where the vehicle was totaled.

• After purchasing a used vehicle, you realize that you have overpaid for it. The outstanding loan on the vehicle is therefore higher than the actual worth of it. In case that the car was totaled, the insurance would only cover the actual value of the car, and not what you paid for it. In this instance it would also be beneficial to purchase insurance that offers "gap" protection because the insurance company would cover the actual worth of the vehicle with the gap insurance covering the remaining amount so that you would not have to owe anything out of pocket.

• You need a car but you have no down payment and your credit score is low. Deciding to purchase a vehicle at a dealership that will finance your purchase without a down payment but with a higher interest rate is the only solution for you. You also end up paying a higher price for the vehicle than its actual worth. Similarly like in the cases above, the insurance company would cover the cash value of the car while gap insurance would cover the rest.

There are various reasons to purchase insurance that offers "gap" protection. Here are some requirements that are common to most states:

• Sometimes you will not be able to find gap car insurance for vehicles that are older than 8 years.

• Various insurance providers will allow you to purchase this type of insurance for a used car even after 24 month after the purchase of your car.

• If you paid in cash for your car then you do not need gap insurance. It is important to note that gap insurance covers the "gap" what you owe on a loan versus and the cash value of the vehicle. If there is no outstanding loan then you will not be able to purchase gap insurance.

• Many car dealerships will not offer gap insurance so you will have to research companies online to find who provides this service.

• When deciding to purchase gap insurance, make sure to research as many companies as possible to in order to receive the lowest quotes. If you owe on your loan exactly as much as the car is actually worth, then you will not need gap insurance.

Determining whether you need gap car insurance might be confusing sometimes. Take time to carefully review policy guidelines and contact your insurance agent to clarify any questions you might have.

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Insurance: Car-Auto
Tom Ando

Email Address:SubscribeCar Auto Article FeedFind More ArticlesSearchSimilar ArticlesDid You Know That Gap Insurance Can Save You Thousands of Dollars on Your New Car?Is Gap Insurance Worth It? What is Auto Loan Gap Insurance and When Do You Need It?What Is Gap Insurance And Why Car Owners Need ItThis Is a Must Read If You Are Getting Ready to Purchase a Vehicle! This Will Save Time and HassleNebraska Car Insurance Guide - Steps to Finding Cheap Nebraska Car Insurance RatesWhole Life Insurance BasicsWhat Is GAP Insurance And Do Car Buyers Really Need It?Pssst - Want To Know A Secret That Banks & Car Insurance Companies Don't Share With You?Explanation of What Gap Insurance is For Auto LoansOptional Auto Insurance CoverageRecent ArticlesFacts Your Insurance Company Might Not Tell You AboutLearn How Teenagers Can Get Affordable Automobile InsuranceCan High Risk Drivers Get Affordable Insurance?Car Insurance Tips For The Modern DriverCar Insurance Quotes Come To FruitionHow to Get the Best Car InsuranceAcquiring a Car Insurance Quote Should Be an Informed ProcedureSomething About Automobile Collisions and Car InsuranceWhy You Can't Find Cheap Car InsuranceFactors That Affect Insurance PremiumsSubmitted On February 23, 2012. Viewed 2 times. Word count: 645.

MLA Style Citation:
Ando, Tom".".23 Feb. 2012EzineArticles.com.28 Feb. 2012 .APA Style Citation:
Ando, T. (2012, February 23). . Retrieved February 28, 2012, from http://ezinearticles.com/?Buying-­Gap-­Insurance-­for-­Your-­Vehicle&id=6901035Chicago Style Citation:
Ando, Tom "." EzineArticles.com. http://ezinearticles.com/?Buying-­Gap-­Insurance-­for-­Your-­Vehicle&id=6901035EzineArticles.com© 2012 EzineArticles.com
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