Should You Buy Gap Insurance?
As you review your car insurance policy, you might come across the option of adding gap coverage to it. Gap coverage is available to bridge the gap between the amount you owe on your car and the actual value of your car, and it is only important if you total your vehicle. If you are not sure if you should buy gap coverage, here are three things you should know.
Find out if your lender includes it in your loan
The first thing to know is that there are a lot of car loan lenders that actually include gap coverage with the loans they offer. If you have a loan on the car, you might want to begin by looking at your paperwork to find out if your loan includes gap coverage. If you cannot find this out on the paperwork, call your lender. If your lender already offers this coverage with the loan you have, there would be no reason you would need to buy another policy.
Evaluate the amount of equity you have in your car
If your lender does not offer it, there is still a chance you might not need to buy it, but this will depend on the amount of equity you have in your car. The whole purpose of gap coverage is to protect you from owing a deficit on your car if the car is totaled. If you have a lot of equity in the vehicle, you would not have to worry about this. If you have no equity in the car or you have negative equity, then it might be important to purchase gap coverage.
If you pay cash for your car, you would never need it
The other important thing to know is that you would never need to purchase gap coverage if you paid cash for your car or paid your car off. If you do not owe money on the car, you would not have a loan. If you do not have a loan, you could not be left with a deficit after totaling your car. This is just one of the many benefits you can reap if you are able to pay cash for the car that you drive.
Gap coverage can be extremely helpful and protective when needed, but it is not always something that people need. To find out if you should purchase it, you may want to speak to a car insurance agent at a firm such as Germain Insurance Agency.