What You Need To Know Before Buying Gap Insurance

What You Need To Know Before Buying Gap Insurance

The constant increase in daily commute distances has made our routines hectic. The need for the comfort of traveling in your own vehicle has made owning a car an essential for most people. A car not only gives you the pleasure of moving from point A to B easily but also the leverage of safely traveling without having to worry about spending too much on public transport.

In return for the comfort that your car gives you, it requires you to maintain it in the best possible manner. While getting your car serviced on time is a right way of keeping it running well, you must be prepared for unexpected issues as well. Investing in a good car insurance can help to this end. Car insurance covers all your car-related expenses subject to certain conditions.

A car starts depreciating the moment you start the engine and drive it around the city. In fact, experts suggest that about twenty percent of the actual value of the car is depreciated in the very first year of purchase. This means that if you have bought a car in installments by making a small down payment, you will be paying more than the current value of the vehicle in a few years. During this span of time, if you have a car accident, you can cover the expenses of the car without paying extra if you have gap insurance.

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As the name suggests, gap insurance covers the difference between the actual worth of the car and the money you owe to the car company. It might seem a little complex in the beginning, but your financial advisor will always suggest you to pick a coverage that can ensure your business safety in the case of a loaned car. You should consider buying gap insurance in any of the following scenarios:

  • If you have purchased a car on installments and have made a down payment of less than 20% of the actual worth of the car on the day that you bought it, the real value of the car goes on decreasing with every passing day, and the interest on the car rises steeply burning a hole in your pocket.
  • If you have got the finance period of sixty months or longer on the car, then an accident can shatter your savings build up.
  • If you have leased a vehicle for a trip or for work, it is one of the most important pointers to buy gap insurance. A leased vehicle depreciates at a faster rate, and a damaged vehicle that was hired can be a huge drain on your savings. Gap insurance conveniently bridges the gap between the worth and the payment you must make to the company in the event of an accident or any such unforeseen incident that renders the car utterly useless for both parties.
  • In case you have invested in a transport facility that depreciates faster than the average, as is the case with big vehicles used for taking goods from one end to the other, chances are that you will have to hit the freeway to travel from one city to another. You are always at the risk of running into an accident and gap insurance can come to your rescue in this case.

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