Why Gap Coverage Is A Necessity On A Newer Car

If you are shopping for a newer or brand-new car, you will have to purchase auto insurance on it; however, you should also consider buying gap coverage for your car. Gap coverage is an optional type of coverage, but you should not view it as an option. This should be a necessity, and you will understand why if you are ever in an accident that leaves your car totaled.

How auto insurance works without gap coverage

When you are in an accident that leaves your car totaled, the insurance company that is responsible for paying the claim will begin by calculating how much the repairs would be on the car. They will also appraise your car in the condition it was in right before the accident took place, and this is simply an estimate. If the repairs are at least 70% of the value of your car, they will total the car.

The insurance company will then pay the current value of your car (the value right before the accident), and this money will be applied to your auto loan. For example, if you owed $30,000 on your car and the car's value was estimated at $22,000 just before the accident, the insurance company will pay the $22,000 towards your loan. This will leave you with a deficit of $8,000, and this will be your responsibility to pay.

Gap covers the deficit

If you have gap coverage, your own insurance company will pay the deficit you experience. In this case, they would pay the $8,000, which means you would owe nothing on the car. You would also not have a car to drive. As you can see, having gap coverage could come in very handy.

Gap coverage is most important for newer cars, simply because they depreciate a lot within the first year or two. If you have a car that is paid off, having gap coverage is not important. In fact, you do not need gap coverage if you do not have a loan on your car.

What gap coverage doesn't cover

There is one other thing to understand about gap coverage, and it involves the down payment you made on the car. If you put a down payment on the car when you purchased it, you will not be reimbursed for it, even if you wrecked the car the day after you made the purchase.

If you are getting ready to make a purchase on a new car, you should talk to an auto insurance company like The Blondin Agency Inc - Nationwide Insurance about adding gap coverage to your policy.

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