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Gap insurance and why we need it

Date: Apr 01 2010
Filed In: Auto Insurance101

It is something every car owner know, the moment that new car is driven out of the dealer lot. It loses value immediately because it is now considered a used car.

The reason why it becomes a pre-own automobile because it is now register to that person and if that person bring it back in. The next person buys it, it is now a pre-own vehicle.

So what does that mean for your auto insurance coverage, generally you’re auto insurance covers toward the actual cash value of your car and not how much the bank loan you the money to buy your car.

For example, if your car is stolen or damaged beyond repair from an accident soon after you brought the new car. The actual cash value may be $14,000 but you owe $18,000 to your bank.

The difference is $4000, the gap will only be cover if you have gap auto insurance policy. Many people are surprised because they don’t think about it, make sure you talk about this insurance policy with your auto insurance agent.

So who needs gap insurance?

The experts generally say anyone buying a new car should consider, especially if you put a small amount of money down and financing the rest. For leasing a new car, gap insurance policy is often required.

Not all insurance company offer gap insurance, so you need to ask your agent. Gap insurance could keep you from coming up short.

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