In times like these where financial responsibility is at an all time low I thought it would be a good time to point out the importance of gap insurance. Gap coverage is available from most insurance companies and is something they would likely try to "up sell" you on in the finance office at your local car dealership. So before you ask yourself at the dealership if this a legitimate product or service, it is. There is just a real good chance that you can do better on your own as far as value goes.
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| We ALL need to cover our finacial ass |
The importance of gap insurance is to cover the full balance of the loan you have on a vehicle in the event it is ever totaled out. If you have ever carried any money over from another loan or you are buying with no money down you most likely would want some gap insurance. Your initial insurance protects the value of the car. Gap financially protects the value of your car vs. how much equity you actually have in it. It covers the "gap" between what your car is worth and what you really owe. For example : You have a loan for $16k and you wipe out a car that the insurance company is scratching out $12k checks for......you will find yourself with no car and a bill for $4k if you don't have gap insurance.
For what you get out of gap insurance compared to what you spend for it is a tremendous value. I never saw it cost anyone more than $600 at the dealership. $600 over the course of a loan for that type of protection is a drop in the bucket. Like I said though. Most could do better on their own and usually pay half what you normally would at a dealer through your current insurance carrier.
Another plus about gap insurance is it protects your loan against swings in the market that could suddenly devalue your vehicle over night. For various reasons such as fuel prices and manufacturer recalls. If you own a vehicle deeply affected by a market swing you can quickly find yourself owing much more on a vehicle than it is worth.
So if negative equity is a concern of yours or even if you have the slightest doubts about it . Get some gap insurance. The impact it will have on your monthly payment will be minimal for the protection you will be getting in the long run. I highly recommend gap insurance.
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