What You Need to Know About Gap Insurance
Have you ever heard of gap insurance? Do you know what it is and whether you should buy it? Although it isn’t for everyone, gap insurance can help you avoid paying through the nose if your vehicle is totalled or stolen and you still own money on your car loan. Here’s what you need to know about gap insurance.
How Gap Insurance Works
As you may know, new cars lose their value very quickly. In fact, some cars can lose up to 20 per cent of their value as soon as they’re driven off the lot!
Therefore, if you purchased a new car and paid little to nothing as a down payment, you may owe more than the car’s depreciated value in the first year or two. Consequently, if your car is wrecked or stolen within this time, you must pay the outstanding loan amount upfront. Gap insurance helps cover these hefty fees, so you’re not left in the lurch.
However, if your car was damaged because you were driving recklessly or under the influence of alcohol or drugs, your insurer may not cover you.
Situations When Gap Insurance Is Required
If you plan on buying a new car, you may be required to purchase gap insurance:
- If your down payment was less than 20% of the vehicle’s value
- If you’re leasing your vehicle
- If you finance your vehicle for longer than 60 months
- If your vehicle is high-value and depreciates quickly
If any of these situations apply to you, you should speak with your insurance agent about purchasing gap insurance. Although new car dealers and leasers typically offer gap insurance, it’s generally cheaper if you add it to your existing car insurance policy.
Car Insurance Experts in Nova Scotia
Since 1980, Eisenhauer Insurance Inc. has been helping Halifax residents with all their car insurance needs. We’re a family-run business and offer a full range of other insurance products like business insurance, travellers’ insurance, life insurance and home insurance. Our knowledgeable agents can help you find a customized solution that meets your needs. Contact us today for a free quote.