Should I Buy Gap Insurance On A New Car?

If you've recently purchased a new car, one of the decisions you may have to make is whether or not to buy gap insurance. Gap insurance is an additional form of insurance coverage that pays the difference between the actual cash value of your car and the amount you still owe on your loan if your car is totaled or stolen. It's an important decision to make and there are a few factors to consider before making your decision.

Understand the Difference Between Comprehensive and Collision Coverage

Before you decide whether or not to purchase gap insurance, it's important to understand the difference between comprehensive and collision coverage. Comprehensive coverage covers damage to your car that is not the result of a collision, such as vandalism, theft or fire. Collision coverage pays for damage to your car that is the result of a collision with another vehicle. Both types of coverage will pay for repairs to your car, but neither will cover the difference between the value of your car and the amount you still owe on your loan.

Consider Your Deductible

Your deductible is the amount of money you are required to pay out of pocket before your insurance company will cover the rest of the cost. For example, if you have a $500 deductible and your vehicle is totaled, you will be required to pay $500 before your insurance company will pay the remaining balance. It's important to factor this into your decision when considering whether or not to purchase gap insurance.

Understand the Limits of Your Insurance Policy

It's important to understand the limits of your insurance policy before you make the decision to purchase gap insurance. Some policies may not cover the full value of your car and if you owe more than the policy covers, you may be responsible for paying the difference. It's also important to note that gap insurance may not cover the full amount of the loan, so you should make sure you understand the limits of the policy before making your decision.

Check With Your Lender

Your lender may require you to purchase gap insurance in order to finance your car. You should always check with your lender before making the decision to purchase gap insurance. They may be able to provide you with the information you need to make an informed decision.

Weigh the Cost of Gap Insurance

Finally, it's important to consider the cost of gap insurance. This type of coverage is typically more expensive than comprehensive or collision coverage. It's important to weigh the cost of the insurance against the potential benefit you may receive if you are ever in an accident or if your car is stolen. It's important to make sure that you are getting the best value for your money.