When buying a new car, is GAP insurance optional or required?
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Asked July 6, 2010
Some car dealerships will require you to carry GAP insurance as part of the contract for your vehicle loan, and others will not. They are entitled to request GAP coverage to minimize the risk of loss to the dealership. In most situations, purchasing or leasing a vehicle should be backed up by GAP coverage, though, as it can prevent you from being personally responsible for the cost of your vehicle if it is stolen or totaled.
GAP coverage is an insurance rider that can be added to a vehicle's regular insurance policy. Its function is to pay the difference between the book value of a vehicle and the actual amount owed on a vehicle loan or lease. Automobiles depreciate very quickly, and most insurance policies only cover the book, or depreciated value, if the car is stolen or considered unrepairable by the insurance company. Without GAP coverage, you would be required to the substantial difference out of pocket, which could create a financial hardship.
GAP coverage will add to the cost of your insurance premiums, but the benefits of having it far outweigh the costs. Compared to what it could cost you not to have GAP insurance, the policy rider is well worth the price of adding it.
Answered July 6, 2010 by Anonymous