What Do You Need to Know About Gap Insurance?

What Do You Need to Know About Gap Insurance? - image

 

While there are many different insurance policies to choose from, some are much more familiar than others. One interesting option is known as gap insurance. What is the purpose of this package? What does it offer and is it worth considering? Let us take a quick look at the basics of such a plan as well as a handful of its primary advantages. You will then be able to make an informed decision and with any luck, save an additional amount of money from a long-term perspective.

 

What is Gap Insurance?

The majority of drivers are unable to pay for their vehicle in a lump-sum cash settlement. Thus, leases and other forms of loans are often used. This is when gap insurance could come into play. There are some drivers who owe a great deal of money in relation to the actual cash value (ACV) of their vehicle. This is particularly the case if the vehicle has recently been purchased. Gap insurance will provide you with coverage between these two disparate values in the event that you happen to become involved in an accident. This can save you a great deal of money if the car is severely damaged or it is considered a write-off. The only other option would be to literally pay out-of-pocket costs for the remaining value of the vehicle.

 

What is Covered in a Gap Insurance Policy?

The main takeaway point here is that gap insurance ONLY covers damage to the vehicle resulting from an accident. It will not include additional clauses such as personal damages or third-party protection. This is the main reason why gap insurance is most often included as an addition to an existing policy. In fact, it is not legal to operate a vehicle with solely gap insurance and most providers will require that you first possess a valid existing policy. Having said this, some of the areas which are covered by gap insurance include theft and negative equity. In this sense, negative equity refers to the the difference between how much you have left to pay on the vehicle and its real-world cash value. Other variables such as fire, engine damage or personal injury are not included.

 

Why Might it Be Important?

The main intention behind gap insurance is to provide you with an additional level of financial protection if your vehicle is severely damaged. The rates are also quite agreeable, as this package does not encompass a standard insurance policy. You might need this addendum if you happen to owe thousands of additional pounds on your vehicle or if it is very expensive in terms of open.-market value.

 

Do you need gap insurance or not? The best way to determine this is to calculate exactly how much you owe in terms of premiums (including interest). If you are still confused, it is a good idea to speak with a professional insurance firm in order to see what they have to offer as well as how much you will be required to pay.