Reader question:
What’s gap insurance?
Christian
Fantastic question.
You might have thought you knew everything before, and then there’s gap insurance. It’s a lifesaver when you’re leasing a car, as well as if you made a small down payment on a car buy. But what’s it for, why is it around?
Gap insurance covers what regular car insurance does not. In this way, it’s a lot like the umbrella policy, but different. If your car is stolen and destroyed, gap insurance closes the gap between what your car insurance covers and what you still owe your financer. This way you don’t get stuck paying a car note for five years on a brand new car that you don’t even get to enjoy. Considering how high car notes can be, having to pay for a car you don’t have can prevent you from being financially able to get a new one. Because of this, gap insurance can make the difference between you getting into a new car after your old one is totaled, and taking the bus.
Gap insurance may even be required in your lease contract, but if it isn’t, it’s still a great idea to protect yourself. Some things to keep in mind when shopping for gap insurance
- most people get gap insurance at the beginning of their lease, but most companies will sell it to them at any point in the lease term
- you have to comply with all terms of the lease. If your lease says you need gap insurance, you need gap insurance.
- they may not honor your gap insurance policy if you don’t have the appropriate coverage, so you’ll have to make sure you have collision and comprehensive car insurance coverage.
When getting a car, always ask your financer and your insurance agent about gap insurance. You’ll be glad you thought of it.
Cheers,
Fashun Guadarrama.