Everybody wants to save money on car insurance, but some people make big mistakes in their efforts to cut corners and save a few dollars per month. According to statistics, one thing that drivers most frequently neglect to consider when comparing insurance costs from one provider to another is gap insurance. But what is gap insurance, and why do you need it?
Gap insurance gives you coverage if the amount of money you get reimbursed is far less than what you owe on a car. This is most useful in situations where you’ve been involved in an accident and the insurance company decides to total your car, which is always done at book value. If your car is brand new and you’re financing it through a lender, you’re still going to be stuck for paying them the full amount – but if the insurance company values your car at a much lower dollar figure, which is often the case with brand new cars that lose serious value the moment you drive them off the lot, the odds are you won’t get enough money from your insurer to cover the bill.
For this reason, experts strongly suggest pricing out gap insurance when comparing insurance policies, especially if your car is less than three years old and you haven’t had much time to pay it down. Once you’ve had your vehicle for a few years or have had sufficient time to pay it down to the point where you owe less than what it’s worth, you can drop the gap insurance coverage.
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