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Do you need gap insurance coverage?

Do you have gap insurance? Do you need gap insurance coverage?

What is gap insurance?

Gap insurance covers the difference in what your car is worth and what you may owe to a bank or lender. The best way to explain the coverage is with a real life example.

If you owe $20,000 on an existing vehicle loan, and have your car stolen or totaled, your current insurance policy may only be willing to pay $17,000 to replace it. There is a difference of $3,000 between the cars value and what your insurance company will pay. Insurance companies will look at the book value of a car and this is often much less than the loan that exists on the car. The day you drive off of the car lot with a new car, you are probably upside down on your loan (you owe more than the vehicle is worth).

In this example, if you had a loss that exceeded the cars value, you would have to either come up with the money out of pocket, or have gap insurance to cover the difference.

Ask your insurance company or agent about gap coverage. It could save you thousands of dollars in the event of a major loss.

There are a number of online providers of Gap insurance. Searching for the coverage at your favorite search engine should locate a number of them. One gap insurance provider is: http://www.gapinsurancequotes.com/