If you recently bought a car or are planning to make a purchase soon, you may be asked about gap insurance. While gap insurance isn’t required for auto loans, it is recommended in certain situations.
What is Gap Insurance?
Gap insurance is often included in car payments as a way to cover the difference in the value of the vehicle if there is an accident before it is paid off. In cases where there isn’t gap insurance, owners of the car will have to pay the difference in the loan if what is left is higher than the car’s value at the time of the accident. With gap insurance, this is covered so you can make a clean break from the loan.
Minimal or No Down Payment
If you didn’t put down a significant amount on a new car loan or didn’t use a down payment, ensuring you have gap insurance included in your monthly payment is a good practice. The car’s value is likely to depreciate quickly, and you’ll need to ensure that you have financial coverage in an accident where the vehicle is totaled.
Long Term Payments
If you took out a car loan expected to last at least five years, ensuring you have gap insurance included is good practice. The reason for this is that you’ll be paying a lot of interest for the first couple of years, not touching the principle of the car loan. The car’s value will depreciate significantly by then, and if you get rid of it or find yourself in an accident, you will have to pay extra out of pocket to cover the car’s value.
If you live in the Monroe, GA, area and need an insurance quote, contact Atkinson Casey Agency today.
