When it comes to car insurance, you will need to carefully choose the right coverage for your policy if you want to know that you are fully protected and covered by your policy, and one type of coverage you may need to add to your policy is gap insurance. Gap insurance is available from most auto insurance companies, but it is not something that everyone needs.

What is gap insurance?

Gap insurance is a unique type of coverage that fills in the gap in terms of the amount of money a person owes on a car and the value of a car. As you probably know, a new car depreciates very quickly. When you buy a car and leave the dealership, you probably will owe more money on the vehicle than what it is worth. If you wrecked the car on the way home from buying it, you could end up owing money to your lender for the car if the car was totaled. This is because the car would be worth less than the amount you owed on it, and your insurance company will only cover damages up to the top value of the car. Gap insurance is the insurance that kicks in to cover this gap.

When is gap insurance a must?

If you have a loan on your car, and if your car loan is for an amount that is higher than the value of your car, you should have gap coverage. If you do not have a car loan, or if your car is worth a lot more than the amount of your loan, you would not need gap coverage. Gap coverage is almost always a necessity when buying a brand-new car, but it can also be beneficial anytime you have a loan on a car.

What should you do before adding gap coverage?

Before you add gap insurance coverage to your policy, you should check in with your auto loan lender to find out if you already have it. There are a lot of lenders that automatically include gap insurance coverage with auto loans, but there are also many that do not. If your lender includes it with your loan, you would not need to purchase it from an auto insurance company.

If you have questions about gap insurance or other types of auto insurance coverage, you should contact an insurance company to speak with an agent.