What Is Gap Insurance, And How Does It Relate To My Auto Insurance?

Most Americans may be unfamiliar with the term GAP vehicle insurance, but this insurance type is rapidly growing and becoming popular, especially with the cost of most new cars today. But what exactly is GAP insurance? Gap vehicle insurance is an additional auto insurance policy which covers the balance owed on the vehicle loan after the auto insurance provider pays the actual cash value. If you buy a twenty five thousand dollar car with a one thousand dollar down payment, the loan holder insists on collision and comprehensive auto insurance on the vehicle for the remaining twenty four thousand dollars owed.

If you paid on time for two years and paid down the principal by three thousand dollars, your loan total is now twenty one thousand dollars. You get into a collision that is not your fault, and you still carry twenty four thousand dollars worth of car insurance collision coverage, so you think you came out ahead. Once the car insurance company gives you a check for the twenty four thousand and you pay the twenty one thousand dollar loan, you are three grand ahead. Wrong, because after two years the actual cash value of your vehicle is sixteen thousand five hundred dollars, and after you subtract your five hundred dollar vehicle insurance deductible the auto insurance carrier cuts a check for sixteen thousand dollars. This leaves you without a vehicle and still owing five thousand dollars to the loan holder. GAP car insurance would cover the additional five thousand dollars owed after the auto insurance claim is paid, so you would end up owing nothing.

GAP auto insurance is an optional car insurance supplement that will cover any gap between the actual cash value of your vehicle and the loan amount still owed. Who needs this type of vehicle insurance? If you have a vehicle which is covered by a substantial loan amount, then GAP car insurance is a wise choice. This insurance costs less than fifty dollars a month usually, and there are ways to get it for less. Auto insurance is a financial product, and this means you need to weigh the options carefully. What are the risks and the benefits of GAP vehicle insurance? Do the risks outweigh the benefits, and what are the odds of you needing GAP car insurance? If you only owe a small amount on your loan then it may not make financial sense to pay this sum of money, but if you owe thousands then this type of supplemental car insurance is a smart choice.

There is an excellent way to save on the GAP insurance policy you need, and this is done by comparing free online car insurance quotes. These auto insurance quotes will allow you to find the vehicle insurance you want at the lowest possible price, so you don't pay more than you have to. By submitting one easy form you will receive auto insurance quotes from many different car insurance carriers.