If you’re buying a new car, gap coverage is super important. But there’s the right way and the wrong way to buy it. We’ll explain.
Are you thinking about buying a brand-new car right now? Well, you definitely want to read this whole article for one little part of the process that will save you a few bucks and make sure you’re set up properly.
I was just thinking about gap coverage, and wanted to talk to you about how to make sure you’re properly covered, but also do it in the most efficient way for the least amount of money.
Gap Coverage And Things To Know Before Buying a New Car
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Gap Coverage
When you’re buying a new car, the people at the dealership are going to ask you if you want a whole bunch of extra stuff. They’re going to ask you if you want extra insurance for that, this, all the other stuff.
And one of the things they’ll ask you about is gap coverage, and gap coverage is a really simple concept to understand.
When you buy a brand-new car, that value of that car might become less than the actual loan that you have on the car, as soon as you drive it off the lot.
Traditionally, a brand-new car is worth more than a car you’ve driven off the lot and now has one owner and has some miles on it.
So, sometimes the loan is more than the car is actually worth for a period of time. If you were to have a total loss in an accident, like your car was totaled, then the insurance company might only pay a certain amount of money, whereas your loan is a little bit more than that.
In those situations, you could be stuck with thousands of dollars of out-of-pocket expenses and be really frustrated because the insurance company didn’t pay out as much as you felt like they should have, and certainly as much as the loan was in that scenario.
How does gap coverage help?
Gap insurance helps to take care of that. In the scenario where you have a total loss and your value on your car is less than the loan you have, the gap coverage will come in and pay that extra $1,000, $2,000, $3,000, $5,000 dollars.
It doesn’t say what it will cover, it just will cover the difference in the loan. So, you definitely want gap coverage.
But you don’t want it from the dealership, generally from the dealership you’re gonna pay about $150 dollars a year for that coverage. And from your normal, auto insurance agent, you’re gonna pay about $30 dollars a year.
Conclusion
So, the price difference is significant and the coverage is absolutely the same. And in fact, it’s easier to get access too because it’s a part of your auto insurance policy already.
So, if you’re buying a new car, say no to gap coverage at the dealership, but definitely let your insurance agent know that you want gap coverage on your auto insurance policy.
If you have any questions, please put them in the comment section below. That’s it for now. We would love to know your thoughts so feel free to share them in the comments below. Share your thoughts with us. And check out our blog for more articles.
FAQs
1. How many kinds of insurance are there?
There are, 4 types of insurance that most financial professionals recommend we all have: life, health, auto, and long-term disability.
2. What type of insurance is most important?
Health insurance is arguably the most significant kind of insurance. A 2016 Kaiser Family Foundation/New York Times survey discovered that 1 in 5 people with medical bills filed for bankruptcy. With a saying like this, funding in health insurance can assist you to control a significant financial difficulty.
3. What is insurance and its importance?
Insurance gives you financial support and decreases uncertainties in business and human life. It gives you safety and security against special events. Insurance gives a cover against any sudden failure. For example, in the case of life insurance financial service is provided to the family of the insured on his death.
4. Why should I get insurance?
Health insurance to cover medical expenses for you, as well as your spouse or children if you have them. Life insurance to provide for you and your family or cover your debts after your death.
5. Is driving without insurance illegal?
You can’t drive or allow somebody else to drive a car or licensed trailer on a public street unless there is insurance for third-party risk, i.e. third-party insurance that will protect damages to somebody else or someone else’s belongings.
6. What happens if you don’t have insurance?
Without health insurance protection, a severe misfortune or a health issue that results in emergency care or a costly treatment can result in insufficient credit or even bankruptcy.
7. How insurance can help me?
General insurance covers you and your assets from the financial threat of something going wrong. It cannot stop something from happening, but if something unforeseen does happen that is protected by your policy it means you will not have to pay the full price of a loss.
8. Why is health insurance so expensive?
The expense of medical care is the single biggest aspect behind U.S. healthcare expenses, accounting for 90% of spending. These prices reflect the expense of caring for those with chronic or long-term medical requirements, an aging population, and the raised cost of new medicines, methods, and technologies.
9. What are the principles of insurance?
In the insurance world, six basic principles must be met, which means insurable interest, Utmost good faith, proximate cause, indemnity, subrogation, and contribution. The right to ensure arises out of a financial relationship, between the insured to the insured and is legally acknowledged.
10. What is the main purpose of insurance?
Its aim is to reduce financial uncertainty and make accidental loss manageable. It does this substituting payment of a small, known fee—an insurance premium—to a professional insurer in exchange for the assumption of the risk a large loss, and a promise to pay in the event of such a loss.
11. What are the 7 principles of insurance?
To ensure the proper functioning of an insurance contract, the insurer and the insured have to uphold the 7 principles of Insurances mentioned below:
• Utmost Good Faith.
• Proximate Cause.
• Insurable Interest.
• Indemnity.
• Subrogation.
• Contribution.
• Loss Minimization.
12. What is the difference between travel insurance and travel health insurance?
International health insurance is created to provide a comprehensive level of health care to people relocating from their home country for a sustained period of time, whereas travel insurance provides coverage for emergency treatment while you are in another country for a shorter space of time.
13. What is the advantage of insurance?
The obvious and most significant advantage of insurance is the payment of losses. An insurance policy is a contract utilized to indemnify individuals and organizations for covered losses. The second advantage of insurance is managing cash flow uncertainty. Insurance gives you payment for covered losses when they happen.
14. What do you mean by insurance?
Insurance is a contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. The company pools clients’ risks to make payments more affordable for the insured.