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What is gap insurance, and do I need it?

What is gap insurance, and do I need it?

Let’s say you buy a new car for $25,000 with no down payment or a minimal down payment. That means you must finance the balance before you can take your new car home. One year later, you are in an accident that totals your new car, but you’re still on the hook for the remainder of your car loan. Insurance pays you $19,000 to cover the cost of the totaled vehicle, but you still owe the bank $23,500.

Gap insurance is a way to ensure the auto loan is paid off in an event like this. Your gap insurance coverage would pay off the remaining $4500 of the loan, leaving you free and clear to purchase another vehicle.

Did you know you can request gap insurance through your auto insurance?

Gap insurance may be called different things depending on where you live. It might be called:

• Equity Gap
• Loan/Lease Gap
• New Auto Security

No matter its name, ask your auto insurance company if they offer an endorsement that will pay off the balance of your loan or lease if your vehicle is totaled. It’s very easy for them to add it to your policy.

For many insurance agencies, a vehicle must be new and not previously owned or titled to be eligible for gap insurance. However, some companies will cover used cars with gap coverage.

Consider these things before buying gap insurance:

Before purchasing a new car, ask your auto insurance agent if they offer gap coverage. When purchasing a new vehicle at a dealership, most dealerships will ask if you want them to provide you with gap insurance. The fees at car dealerships will most likely be much higher than they would be through more affordable insurance in Austin, Texas. This kind of protection is very affordable when it’s bundled with your auto policy.

Additionally, gap insurance doesn’t only cover the vehicle in the case of an accident. Gap insurance also protects your vehicle from theft. Most new vehicles that are stolen are never recovered, so it is a good investment for many drivers. We make it easy to stay insured, so call us for a quote today!