Do You Need Gap Insurance On A New Car
Suppose you bought a 30 000 car and two years later it s stolen and never recovered.
Do you need gap insurance on a new car. This insurance is usually offered to you in a dealership s finance office when you re buying a car and it s designed to add on to the insurance coverage you already have. If you ve purchased a car at a dealer before you ve probably been offered gap insurance an acronym for guaranteed asset protection insurance. If you plan to lease see car leasing. Gap insurance coverage helps indemnify your family in case of a total loss.
Because depreciation is most severe during those first. Your car is. Maintenance repairs and more more information. To avoid the need for gap coverage make car buying and financing choices that put you right side up rather than upside down from the start.
Before you can weigh the value of a gap insurance policy you ll need to learn how the insurer will value the car in question. Gap insurance can help take care of the shortfall. For example if you pay 30 000 for a new car and 15 months later it s written off your car insurer will pay out 18 000 what it s worth at the time. For buyers gap insurance only makes sense if you expect to be upside down on the car a situation in which you owe more than it is worth.
Guaranteed asset protection or gap insurance is a financial product often sold when you buy a brand new car. If you re dead set on getting a brand spanking new car if yours is written off you could consider gap insurance. You ll usually need to buy gap insurance within three years of buying a new car at a minimum. For information about getting a good deal on a new car see buying a new car and trading in your old one.
Insurers don t pay off your loan but they do consider condition mileage features and local sales information to determine actual cash value. In the event your car is stolen or written off total loss gap insurance covers the difference between the current value of the car the amount your car insurer will usually pay out and the amount you paid for the car in the first place or any outstanding payments. Essentially you do not need gap insurance if you are certain that your loan to value amount will not leave you with an upside down car loan in the event of a total loss. If you made a low down payment if you bought a car that depreciates rapidly if you have a high interest rate or if you rolled over other costs into your new car payments such as money you still owed on a car you traded in gap insurance makes sense.
Although insurers guidelines vary a company may require one or both of the following.
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