When they think about car insurance, many people are thinking about state minimum liability insurance to save money. For example, many different types of car insurance will cover different problems. For example, liability insurance only covers damages and injuries to the other people in the accident if you caused the accident. That means if your car is damaged in the accident too, it will not be covered.
Losing your vehicle in an accident can be financially devastating if you don’t have the cash in the bank to get it repaired or buy a new one. That is why when you get a loan for a new car, you are required to carry additional insurance referred to as full coverage. In addition to liability insurance, there is also comprehensive coverage, collision coverage, and gap insurance.
Gap insurance is optional, and many people choose not to get it to save money. While the assumption is that you won’t need to use gap insurance, it is invaluable if you do end up needing it. Additionally, you don’t always have to have it. You only need it until the amount owed on the car is equal to or less than the car’s value.
What is gap insurance?
Gap insurance is designed to cover the remainder of your lease if your car is totaled. When you buy a new car, the value of the car immediately starts to depreciate, which means you will owe more than your car is worth for a period of time. The gap insurance will cover the difference between the value of the car and the loan amount still owed on the car. If you total your vehicle in an accident, this insurance will pay off the remainder of your loan so that you can get a new vehicle without additional debt.
Why should I get gap insurance?
Even with full coverage car insurance, if you are in an accident and your vehicle is a total loss, your insurance will only pay you the vehicle’s value. If the value is less than what is owed on your loan, you will be responsible for paying off the remainder of the loan.
Also, you will not have any money to get a replacement vehicle since the money had to go to your loan balance. Some car dealerships will work with you and add the unpaid loan amount to a new loan for a new car. However, that will make the new loan immediately higher than the value of the new car, so you will have a larger loan, higher monthly payment, and be in the same position if you are another accident or want to sell or trade-in the new vehicle before paying off the loan.
Where do I get gap insurance?
Car insurance companies also offer gap insurance. The car dealership where you buy your vehicle may also offer gap insurance. To save money, it is important to shop around and get a couple of quotes for comparison. The price of gap insurance may vary based on where you live. For example, you may be asking, who offers gap insurance in Texas? However, instead of looking for places that offer gap insurance, your best bet is to go through a company that offers insurance quotes from multiple companies, so you can see who offers and the prices at the same time for a side-by-side comparison.
There are lots of ways to save money, but skimping on car insurance should not be one of them. If you do not have the money in the bank to go out and buy a new vehicle today, then you need insurance to protect yourself, your vehicle, and your financial future.