Approximately 3,700 people die every day from car accidents, but many more are involved in car accidents every single day.
You never know when you’ll be involved in a car accident, and that’s why it’s crucial to have car insurance.
If you’re reviewing your auto policy, you might have some questions, including, “is gap insurance worth it?” This question is a common one that people ask, and the answer is often yes.
As you ponder this question, it might be helpful to know the following seven major benefits you can reap by purchasing gap insurance.
1. You Take Risks Anytime You Drive
Gap insurance is a unique form of coverage that protects you if you total your car. While you might think you will never total your car, or even get in an accident, statistical information says you will.
According to one report, the average person crashes their car once every 17.9 years. Many people crash their cars a lot more often than this, though, while some people may never encounter a collision of any kind.
The fact is that you never know when you’ll get in a car accident. You take risks every time you pull out of your driveway onto a road. You will benefit by purchasing gap insurance if one of your trips out leaves you with a totaled car.
2. A Totaled Car Can Leave You With a Deficit
The primary purpose of gap coverage is to cover the deficit you may end up with if you total your vehicle.
Suppose an accident leaves you with a totaled car. When the insurance company pays your claim, they will determine the amount to pay for your car by viewing its current value.
Imagine if your car’s current value was $15,000, but you owed $20,000 on it. If the insurance company pays $15,000 for your vehicle, you will still owe $5,000 to your lender.
If you don’t have gap insurance, you will personally have to pay the $5,000 deficit you owe. If you have gap insurance, the insurance company covers the debt, leaving you with a zero balance.
3. It Provides Financial Protection
Getting in an accident that leaves your car totaled can leave you in a bad financial position. If you view the example above, would you have trouble affording a new car if you had to pay for a new one and pay the deficit of $5,000?
Many people would not be able to afford this scenario, which is another reason you benefit by purchasing gap insurance. If you want to avoid financial problems after an accident, buy gap coverage.
4. You Can Safely Buy a Car With Less Money Down
Some people try to avoid being in this position by putting more money down when they purchase cars. If you put more money down, you will have more equity in the car. If you ever total your car, you might not have a deficit to deal with afterward.
What if you don’t have more money to put down on a car purchase, though? Should you not purchase the car simply to avoid the potential for having a deficit if you wreck your car?
Buying gap insurance covers this issue. You can safely put down less money when purchasing a vehicle, and you won’t have to worry about encountering a deficit if you wreck the vehicle.
You can buy gap coverage for new or used cars; however, you can reap a lot of outstanding benefits by purchasing a used vehicle instead of a new one.
5. Cars Depreciate Faster Than You Think
Another thing to consider is the rate at which cars depreciate. Most people know that car values depreciate quickly, but they don’t realize just how quickly this process occurs.
If you buy a brand-new vehicle, it will lose between 9% to 11% of its value one minute after you drive away from the car dealership. Within one year, your car will lose at least 20% of its value.
Gap coverage protects you from the natural depreciation that happens when you buy a car.
6. You Won’t Need It Forever
Another benefit of gap insurance is that it is a temporary form of coverage. In other words, you won’t need it forever. You can eliminate your gap coverage as soon as you pay off your car loan.
If you don’t have a car loan, you can never encounter a deficit on your loan after an accident.
You can also eliminate the coverage if your car reaches a significantly higher amount than the amount you owe on the car. Most people keep gap protection until they pay off their vehicles, though.
7. It Is Affordable
The last thing you should know about gap coverage is that it is affordable. There are times when gap insurance costs just $20 a year. While this is on the low end, you shouldn’t have to pay a lot for the coverage.
Paying just a little more for your insurance coverage offers the protection you need and can give you peace of mind. When you have the right insurance types, you have no reason to worry about what will happen if you get into a collision.
You can purchase gap coverage from the car dealership that sold you the vehicle, or you can go through your auto insurance company.
Is Gap Insurance Worth It? Yes It Is
So, is gap insurance worth it? Absolutely.
You should never drive a vehicle with a loan without gap coverage. If you do, you won’t have all the protection you need.
If you are interested in buying a new car right now, make sure you ask the dealer about gap coverage. You can visit us today to start shopping for the right vehicle or give us a call to learn more.