What is Gap Insurance, do I need it?
Most people have at least heard of gap insurance, but may not fully understand its purpose. While some assume that gap insurance is an unnecessary fee, it can be very helpful depending on the type of driver you are. Read ahead to find out if you can benefit from gap insurance:
What is gap insurance?
This may come as a surprise to some, but insurance companies will not reimburse you for the amount you paid for your vehicle, only the amount that it was worth at the time of the theft or collision. Gap insurance can fix that, by paying you the difference between that figure and the total amount you originally paid for your car.
While many drivers don’t like to think of the possibility of their car getting totaled, accidents can happen to anybody, which is why gap insurance can become quite beneficial.
When should I purchase it?
Whether you need gap insurance or not really depends on the type of driver you are. If you drive often, it likely won’t take you long to accumulate a number of kms on your vehicle. This will negatively affect your car’s value, meaning an insurance company would owe you less if you happened to have your vehicle totaled. Of course, if you have gap insurance, you won’t have to worry about tacking on a few extra kms.
You should also consider purchasing gap insurance if your down payment is low or if you’re financing for a longer term. In both instances, you may end up owing more than the vehicle is worth. As a result, if you get into a serious accident, you may have a difficult time repaying what you owe without gap insurance.
Finally, some vehicles just depreciate more quickly than others. Do some research before you buy your next vehicle to see if it tends to depreciate at an abnormally high rate. If it does, you should really consider adding gap insurance to your purchase.
When can I purchase it?
Gap insurance is typically bought at the time that you purchased the vehicle at the dealership. If you go through an insurance company, you’ll likely be given 30 days after your car purchase to buy it.
Is Gap Insurance expensive?
Fortunately, gap insurance doesn’t cost that much, especially considering how valuable it can become.
Is it mandatory?
While most car purchases don’t require gap insurance, others do. If you lease your vehicle or put zero money down, you may be required to purchase gap insurance.