You have auto insurance. It is a strong policy that will cover you. Why would you need gap insurance?
Gap insurance can help cover you in case you need extra coverage, particularly if you have a loan on your car. In such a situation, you should consider investing in gap insurance.
What is gap insurance?
Gap insurance can be hard to understand at first.
It is best to think about gap insurance by first thinking of your regular auto policy.
A general car insurance policy often covers your car based on the value of the car. As you drive your car, that values decreases. Regular auto coverage levels are often lower on older cars than they are on newer cars. Many different factors influence the value of a car, such as the mileage and age of the car.
When buying a new car, many buyers finance, lease or take out a loan to pay for the car in installments. Having a loan or financing on the car means that the car’s driver handles paying back the financing to the bank in total.
But, your auto insurance will cover the value of the car, not the value of the loan. That’s where gap insurance comes into play.
When will gap insurance pay?
If you total your car while you still owe money on the car, you will receive a payout from your insurance company. Companies usually base the payouts on the value of the car at the time of the accident.
Yet, you will still have to meet the total value of the financing on your car. That way, you can free yourself of paying money to a bank for a car you no longer have.
That’s where gap insurance can help. Gap insurance will help you pay off most, if not all, of the remaining value of your financing. If your car is newer, and you still owe a significant amount on the car, gap insurance can go a very long way to helping you pay off your financing in the event of a totaled car.
We’re here to help you learn more about gap insurance so that you can rest easy having your options covered. Give Insurance Providers a call at 417.623.8300 today for a Joplin auto insurance quote.