Buying auto gap insurance online can be a good way to protect yourself from financial loss while saving money over the gap insurance policies offered by car dealers or local insurers.
Auto Gap Insurance Explained
Auto gap insurance is a type of insurance that pays the difference between what you owe on a car and what the car is worth if it is deemed a total loss for insurance purposes. For example, assume you have a vehicle that has a $10,000 outstanding loan balance. That vehicle is stolen, or it is damaged in a car accident beyond repair. Your comprehensive insurance coverage (in the case of theft) or collision or liability coverage (in the case of an accident) is going to pay for the car, but the insurance company only values the car at $9000.00
If you do not have gap insurance, you will be responsible for the entire remaining $1000 balance that is necessary to pay off your outstanding auto loan. Even though you no longer have the car or the benefit of driving it, you still have to make payments on it or find a way to pay off the remaining balance. Gap insurance prevents this from happening by paying the difference between the amount your insurance company values your car and the amount you owe.
The Importance of Auto Gap Insurance
Auto gap insurance has become more important as people take on larger and longer loans for vehicles and buy vehicles without a down payment. Since vehicles can decline in value quickly it is easy to become upside down on your auto loan.
Since many people end up owing more on their cars than the cars are worth, gap insurance is necessary both to protect those individuals and to protect the lenders. No one wants to pay money for a car they don't have, and if lenders don't get paid, then they have to pass that cost on to all consumers in the form of higher interest rates.
Making the Decision
If your lender doesn't require auto gap insurance you may still wish to consider it to protect yourself, especially if you buy a car that you know won't hold the resale value or if you know you are not going to pay off the car quickly and thus you might end up owing more than its value. You should also buy auto gap insurance if you know you won't be able to afford to pay off the auto loan if the proceeds from the insurance company won't pay the balance in full, since otherwise you could end up defaulting on the loan and hurting your credit.
Buying auto gap insurance online can potentially save you money over the dealer or lender's policy offerings.
Advice on Buying Auto Gap Insurance Online
If you are going to buy auto gap insurance, make sure you compare the monthly premiums online as well as the terms of coverage. Choose the lowest premiums that provide you with the coverage you need. The policy should remain in effect for the length of your loan and should cover any outstanding payments owed in the event of a loss of any sort including a collision, theft, vandalism, or any other loss that would result in your insurance company paying you the total outstanding value of the vehicle as opposed to paying for repairs.
To compare online policies, make sure you check a number of different websites to make sure you get the best deal. There are a number of different online sites that allow you to either buy or compare insurance including:
You can also consider the website of your existing car insurance company, since most insurers offer gap insurance as an add-on to your existing policy, which may potentially be cheaper than a standalone gap insurance policy.Regardless of which particular company you choose, you will likely be glad you opted for the additional protection, especially in the event that the worst happens and you do sustain the total loss of your vehicle when you still owe money on the auto loan.