Gap Insurance Coverage
When you lease or buy a new vehicle, it will start to lose value the second that you drive off the lot. In fact, most vehicles lose almost 20 percent of the value in the first year that they are on the road. The fast drop in value can mean that you do not have the enough auto insurance to cover what you owe on the car.
Typical auto insurance policies will only provide coverage for the depreciated value of your vehicle. If you finance the purchase of your vehicle, or you are leasing it, you most likely will owe much more on the vehicle that what you will receive as a payout from your auto insurance company. Investing in a gap insurance policy will provide the additional coverage you need to ensure that you are not reaching deep into your pockets to cover the cost of your totaled vehicle.
You should consider a gap insurance policy for your vehicle if:
- You financed the vehicle for 60 months or longer.
- You made a down payment of less than 20 percent.
- You are leasing the vehicle.
- You purchased a vehicle that depreciates in value much faster than average vehicles.
- You rolled over negative equity from a past car loan into your new loan.
When you buy or lease your new car, you will most likely be offered gap insurance from your dealership. However, before you decide on the coverage, you should talk to your insurance agent, since you can typically get a less expensive policy through your insurance company. Most gap insurance policies will only increase your annual auto insurance premium by around $20.
For all of your auto insurance needs, no matter if you are buying or leasing a vehicle, contact the insurance professionals at Steve Wilk Insurance Agency in Lombard, Illinois.