Reader question:

What is gap car insurance coverage?

Rudy

Great question, Rudy.

When you are either buying a car or leasing it, the amount that you owe near the middle and end of the contract often is much more than the amount that the car could sell for at that point, which is why once you have a car you are pretty much stuck with the note. Gap insurance is a key type of car insurance coverage for those who find themselves in this situation.

Gap insurance takes care of whatever expenses come up after the rest of your policy limits are exhausted. This most often comes up in the case of a new or leased car which is either totaled or stolen. When this happens, the car insurance company usually only pays the policy holder for the total cash value of the vehicle, and normally that is not even enough to finish paying off the loan for the car, much less to get themselves into a new car. In these cases, gap car insurance coverage kicks in and helps the driver avoid having to continue years of paying for a car they do not own, or instead choose to give the total cash value to the finance company and live without a car.

There are some lease companies and car financers who make having proper gap insurance coverage part of the contract, the same way as they do comprehensive and collision. Even if they don’t, though, it’s still a great buy that can save you a lot of headache. Here are some quick facts about the gap:

• While you can add gap car insurance coverage to the policy as soon as you get a car, you can also add it at any time while you have it.
• If gap insurance is mandated in your lease or finance contract, then it is just as necessary to buy as comprehensive and collision if you want to avoid having your car repossessed.
• The only way to get gap insurance is if you buy the maximum amounts of all other insurance; if you don’t, then it will not even work.

Cheers,

Fashun Guadarrama.