Making sure your auto insurance is just right for your vehicle and for your financial wellness is important. One of the steps you should take on a regular basis is ensuring you have the right type and amount of auto insurance in place. Do you need gap coverage? What can it offer to you and who doesn't need it?
What is Gap Insurance?
The fact is, gap insurance may seem like a waste of money, that is until something happens and you are faced with a significant loss and no real way to recoup it. Let's say you purchase a new vehicle that is worth $20,000. You obtain a lease or a loan for the vehicle. What you may not realize is that the moment you roll that vehicle off the lot, the value of the car drops.
Over the next few months and even the first few years of ownership, the value of the car tends to be much less than what you may owe on it. If you are involved in an accident at this point and the vehicle is totaled, you may not get enough back from the car insurance policy to replace your vehicle because of this difference in value.
According to Edmunds.com, the average brand new vehicle will see its value drop by 30 percent in the first year of ownership. By the third year, the value will drop to about 50 percent of what you purchased it for. Gap insurance can help to pay off that "gap" of value if your vehicle is involved in a serious incident during that time.
Who Needs Gap Insurance?
In most cases, gap insurance is recommended for those who have purchased a new vehicle. During the first few years of ownership of that vehicle, it is important to maintain the coverage you need to cover the entire value of your car. Gap coverage makes that possible.
If you are unsure if you need or have this type of auto insurance, check your policy. It is essential to have insurance that gives you the confidence to know that your car is protected to its full value, no matter if and when you are involved in an accident.
Protect your investment. Call Andrews Insurance Agency at 401-722-4271 for more information on Pawtucket auto insurance.