Buying gap insurance is a good idea for many automobile buyers – especially those purchasing new vehicles, taking out longer loans, or paying low down payments on a new car purchase. Gap insurance coverage can be instrumental in making up the difference between an insurance settlement and what you owe on your vehicle if a total loss occurs, sometimes saving you thousands of dollars.
You need to know that the car dealership isn’t the only place you can buy gap insurance. In fact, it’s probably not the best option for new car owners. These are a few reasons why.
Dealership Gap Insurance Costs More
When purchasing gap insurance through a dealership, the total cost of the coverage, generally between $500 and $700 according to Fox Business, is wrapped into your loan value. This means you’ll pay much more over time for your coverage because interest will be charged on your premium in addition to the amount of money you finance to purchase your new vehicle.
Wouldn’t You Rather Compare Costs?
Costs vary by insurers for different types of coverage. Choosing to buy directly from an insurance company rather than the dealership allows you to compare policy rates from multiple insurance providers. You can find the best coverage for your needs at the best price.
Not Everyone Needs Gap Coverage
The bottom line is that your auto dealer may be more than willing to sell you this type of coverage, but that doesn’t mean you necessarily need it. Gap insurance is only necessary if you owe more on the car than it is worth.
If you’re putting a sizable amount down on your purchase, you may not need gap coverage at all. If the outstanding balance on your vehicle is less than the replacement cost, your collision and comprehensive coverage will pay off the loan on your vehicle if you’re at fault for a total loss. If you’re hit by another driver who doesn’t carry enough insurance to replace your vehicle, or isn’t insured at all, your uninsured or underinsured driver coverage will cover the cost of the loan.
Working with a trusted insurance agency can help you know if you need a gap insurance policy and then find you the right coverage at the right price to meet your protection needs.