Preheader Home Facebook Twitter LinkedIn
 

If you have recently invested in purchasing a brand new car, you may have been advised by your insurance agent to purchase something called gap insurance.  If you are unfamiliar with gap insurance, you're probably wondering if it’s even necessary to add this additional cost to your new policy. To some, the thought of maintaining an insurance policy without gap insurance is not a big deal and for its cost can be overlooked by the normal driver. Whereas, other astute investors know that protecting their investment is not only worth the added coverage, but the key to maintaining piece of mind.

What is gap insurance?

If you don’t have enough money to purchase a new car straight out, you may have to finance it .  Financing a car means having to pay a certain amount down and the rest of the value of the car is split into monthly payments for a fixed number of years.  A normal insurance policy covers the amount of the car in the event of a car accident.  However, if this is a very expensive car, your policy may not cover all the costs, leaving you to continue paying for the car even when you don’t have it anymore.

Gap insurance provides a way to recover these costs as well as the cost of sales tax and your registration or title fees.

The problem with not having gap insurance

One phenomenon that occurs shortly after purchasing a car is the rapid devaluation of its value the moment you put your foot on the gas pedal. Although cars do depreciate over time, they also depreciate several thousand the moment you drive off the lot.  This may not seem like a problem, but let’s examine this a little closer.

Example:

If you purchase a car that cost $30,000 with $3000 down, after driving off the lot this car may depreciate down to $20,000.  If you get into a car accident and the car is totaled your insurance company will only pay that depreciated amount which is $20,000.  This may not seem like a problem right away, but keep in mind you're still making payments on the car, which include interest, so you’ll be stuck owing the car dealership $7000.

Gap insurance would cover you for this remaining amount.

Who needs gap coverage?

If one of the following categories applies, you may want to look into getting gap coverage:

  • You own a car that depreciates quickly
  • You’ve chosen a long finance term
  • You paid less than 20% down
  • You are leasing a car
  • You plan to drive more than 15k miles per year

When you are leasing a car, the car dealership may actually require that you get gap insurance coverage before leaving the lot.  Although most car dealerships sell gap insurance, you don’t have to be compelled to buy from them.  It is wise to shop around before signing the dotted line.

For more information about St Paul auto insurance or to obtain a quote, give Lancette Agency a call on 651-264-1230.

Share |


No Comments


Post a Comment
Name
Required
E-Mail
Required (Not Displayed)
Comment
Required


All comments are moderated and stripped of HTML.
Submission Validation
Required
CAPTCHA
Change the CAPTCHA codeSpeak the CAPTCHA code
 
Enter the Validation Code from above.
NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
Blog Archive


View Mobile Version
  • Auto Owners Insurance
  • AAA
  • Selective Insurance
  • West Bend Insurance
  • Integrity
  • Progressive Insurance
  • Dairyland Insurance
Local: (651) 264-1230|Fax: (651) 264-1233 1322 Helmo Ave N|St Paul, MN 55128
Home|Our Products|Customer Service|Payment Options|Report a Claim
About Us|Our Carriers|Partners|Blog|Contact Us
Facebook Twitter LinkedIn
Powered By Insurance Website Builder