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You go to the dealership to purchase a brand new car. You are overjoyed that you've finally found the car of your dreams. You get approved for financing and then find out through the dealership that if the car is totaled in an accident, your insurance company may only pay what the car is worth at the time. This will leave you with a "Gap" between the amount paid by the insurance company and the amount left on your loan. That's where Gap Insurance comes in.

Gap insurance will usually pay between 120%-150% of the value of the car in the event of a total loss. More than likely, this will be enough to pay off your car loan and give you some peace of mind. It is important coverage to have. If you don't have Gap Insurance and the vehicle is totaled, you could be left making payments on a vehicle that is totaled.

Don't assume, however, that your car dealership will offer you the best rates on Gap Insurance. Do your homework to find the best deal. Some companies will offer you quotes online, and many auto insurance companies will offer Gap Insurance as an add on to your auto insurance policy at a reasonable price. Be aware, however, that if you choose to get coverage from your auto insurance company and switch insurance companies, your new auto insurance company may not offer Gap Insurance. It was for that reason, that we decided to purchase Gap Insurance with the dealership just to be safe, even though it was slightly more expensive.

Learn more about this author, Julie V.
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