Should I Purchase Gap Insurance: Taxis Companies and Automotive Automobile Reviews

Should I Purchase Gap Insurance?

Gap insurance covers you if your car note balance exceeds the fair market value of your car. If you are to incur a total loss on a vehicle for any reason - from an accident to an act of God, you would normally still owe the finance company anything that the car insurance company did not pay out. In addition, the finance company would want their money relatively quickly. These types of situations are why so many people purchase gap car insurance.

Is Gap Insurance Worth It?

For some people, gap car insurance is worth the cost. Individuals who finance 100% of their car along with tag, title, and other fees could easily find themselves upside down on their car note the second they drive off the lot. Some other people that trade in a car and roll the balance of their previous vehicles note into their new note should also consider gap insurance.

On the other hand, people that put 5-20% cash down on their vehicles need to do a little more soul-searching before rushing out to purchasing gap insurance. These individuals will have to do some calculations to see if gap insurance is worth purchasing.

How to Calculate if Gap Insurance is Worth Purchasing

If you need to see if gap insurance is worth purchasing, you will need to do a simple calculation. Find out how much your gap insurance premium will be monthly. Figure out the difference between your car note and the fair market value of your car. The best guide to use to figure out the value of your car is the NADA guide.

Take your gap premiums and multiply them by the number of months in your car loan. Compare this value to the difference between your car’s fair market value and your note balance. If the gap premium is significantly less than the “gap” your decision is simple. Buy the gap insurance.

Purchasing Gap Insurance is an Individual Decision

Sometimes in life there are risks and rewards. You can take the “safe” route and purchase gap insurance. At the end of the day, I can guarantee you that you will lose all the money you pay in premiums. If you don’t lose gap insurance you may or may not lose any money.

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Should I Purchase Gap Insurance?

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