• Choosing the Right Amount of Gap Insurance Coverage

    Buying gap insurance online is a pretty easy thing to do. It is not required and is not always necessary but it can give you some real peace of mind if your car is totaled or stolen while it is still fairly new.

    Anyone who has a loan on a vehicle that is greater than the vehicle is worth. If you drive an older, low-value vehicle and have paid it off, gap insurance is uneccessary. As you pay your loan down, and the amount you owe closes in on the value of the vehicle, it is best to drop your gap coverage. If you are leasing a vehicle, the lease should include gap insurance. If you put less than 20 percent down on your vehicle, you should consider gap insurance.

    What Is Gap Insurance?

    Guaranteed Auto Protection or Total Loss coverage, as it is also known covers the difference between the value of your vehicle according the the insurance company, and the amount you still owe on the vehicle. Your insurance company will determine a fair market value for your stolen or totaled vehicle when you make a claim. This value could be well below what you still owe on the vehicle due to depreciation. Gap insurance covers this balance.

    As an example, if you recently purchased a $25,000 car and it is stolen or totaled in the first few months or years of ownership, you may be out a few thousand dollars. A new car starts depreciating the moment you drive it away from the dealership, often to the tune of several thousand dollars. If the insurance company decides that your vehicle is now worth $19,000 but you still owe $24,000 on the loan, all of a sudden you are $5000 out of pocket. Your gap insurance would cover this difference.

    Decide How to Buy

    The web is just one option when it comes to gap insurance. If you are financing the car with the dealership they will often offer gap insurance to you. Get the details of the coverage and then check around. The same can be said for finance companies and banks. They may offer you a gap waiver which means they agree to waive the difference between an insurance payout and your balance on the loan.

    Not every insurance company offers gap insurance but many do. Check with your local agent and ask for a gap insurance quote. As an example, Progressive offers gap insurance while GEICO doesn’t.

    You should have enough gap insurance to cover the difference between the balance of your loan and the value of your vehicle. Gap insurance quotes are often done as a one payment type of coverage. A single payment of $400-$500 will often provide coverage for the life of the loan. The payment amount will vary greatly depending on the vehicle type and the size of the loan. More expensive cars may require a payment of up to 4 percent of the cars value.