Should I get gap insurance? –

As soon as you start driving off the dealer's lot, your new car's value drops.

If your vehicle gets into an accident or is stolen, your insurance company will only pay you what it's worth, not what you owe for it. Gap insurance can change that.

Gap (Guarranteed Asset Protection) insurance is insurance for that "gap" -- the difference between what you owe on your car and how much your insurance company values it.

Here is an example of how GAP insurance coverage works:

Loan balance of your car or truck on the day it's destroyed:	$24,000 (this is how much you owe the bank)
Actual cash value on date it's destroyed:	$16,000 (this is how much your insurance company says it's worth)
Payoff WITHOUT GAP coverage:	$16,000 (this is how much your insurance company will give you)
Loan balance after payment:	$8,000 (this is how much more you need to pay the bank out of your pocket)
Payoff WITH GAP coverage:	$24,000
Loan balance after payment:	$0 (With GAP insurance, you don't have to pay from your pocket)

As you can see in the above example, GAP insurance is good to have.

Gap insurance could be the difference between getting all your money back and owing the bank money for a car you don't have anymore. Yet it is only good as long as your insurance company values it more than what you owe for it. That's why its better to buy Gap insurance on a newer car rather than an older car, and it's essential if you've carried over negative equity from your prior loan.

Where Can I Get Gap Insurance?

In many cases, your dealer will offer you the option of picking up gap insurance when you purchase your car. You can also get it from your auto insurance provider.

Who Needs Gap Insurance

You do, if you:

• purchase a new car
• financed your car with little or no money down
• have negative equity on your current vehicle or financed your vehicle with negative equity

If you lease or finance your car or truck, it is smart to have GAP insurance. It's actually inexpensive compared to what it saves you.