Imagine buying your dream car and being excited to finally own it. You got it at a great price and have the monthly payments that work best for your lifestyle. Then, unfortunately, someone runs into your dream car and totals it. You then realize that your car depreciated a lot more than you expected it to in the short time you owned it and the value of your car is now far less than what you owe on it. For instance, the insurance company offers you $15,000 for your car because that is the current value of it before it was totaled. The main problem is that the loan for your vehicle is $25,000, meaning you owe the additional $10,000. Where are you going to come up with that money? You had no idea your car diminished value so quickly! Well there is an answer for that problem: gap insurance.
Gap insurance is the coverage of the difference, or the “gap”, between what you actually owe on the car and what the insurance company is willing to pay for your car. An insurance company will only pay for what the car is valued at the time of the wreck, leaving you with the “gap” of what the remaining balance will be. With the safety of gap insurance, which is often called gap protection, your car is securely covered if you are involved in an accident, no matter if the value of your car is no longer as much as what you still owe on it.
Purchasing a new vehicle is a big decision and often comes with a lot of details and questions to be answered. One important detail is to ask about gap insurance so that your dream car is protected in case of an accident when you least expect it. You can ask the car dealer or your insurance agent about gap insurance.