What Is GAP Automobile Insurance Coverage ?
If you think you have all your coverages straight and you’re ready to choose the best California automobile insurance policy, along I come to throw in something that will send you all out of whack. It’s called gap insurance, and most of those pages on the internet that purport to tell you everything you want to know about automobile insurance leave it out, but for anybody who is purchasing a car, it’s is a must have.
My new, 2007 Chyrsler PT Cruiser is worth about $15,000 right now according to Kelley’s Blue Book. However, I owe slightly more than $18,000 on it, and the more I pay and the less I owe…the less my car is worth! They call this an upside down car loan, because at some point (okay, at most points) during the time you are paying off your car, you will owe more for it than it is worth.
Here’s the catch.
When you total your car, and you file a claim with your automobile insurance company, the amount that they pay you to get another car is what the car is worth, period, not what it’s worth to you. So if I were to completely wreck my car beyond repair right now, my automobile insurance policy (sans the gap insurance coverage) would entitle me to fifteen thousand dollar, leaving me three thousand dollars in the red.
This is not something you want to deal with. Do you want to be without a car, and on top of that have to pay for a car you no longer have?
The way we have to solve this is to add gap insurance to your automobile insurance policy. What gap insurance does is cover the gap between what your car is worth and what you owe, so that you don’t end up paying for something you don’t get to use. A lot of car financing companies and banks that loan you money to get a new car will require you to have gap insurance, but many don’t. Mine, for example, does not require gap insurance, so if I hadn’t already known about it my car might have just gone without.
Sometimes you don’t even have to get gap coverage from your automobile insurance company. Instead, it will be part of the deal with your lease, so you’ll be covered right from the start. Here’s a couple things that you need to think about when getting gap automobile insurance:
- Usually you just get the gap automobile insurance as soon as you get the car, but if you forget or didn’t know about it, almost all automobile insurance companies will let you get at any time.
- If your lease requires gap insurance, you have to get it. No excuses.
- In order to get gap insurance, you have to have full coverage. That means comprehensive and collision coverage.
Remember that just because you have gap insurance doesn’t mean you can default on your loan once your car gets stolen or wrecked. I make my car payments on the 28th, so if I totaled my PT Cruiser tomorrow, I’d still have to make that payment on the 28th. You don’t get to stop paying until you get that gap CA automobile insurance check.
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