If you’re leasing or financing a new car, adding gap insurance to your policy may be a good idea. (Ready to get your quote? Start here.) This coverage offered by some carriers helps you pay the difference between what your vehicle is worth and what you still owe on your loan in the event your car is totaled or stolen.
A brand-new vehicle instantly depreciates in value when it’s driven off a lot. And according to the Insurance Information Institute, most cars will lose 20% of their value within the first year of ownership.
Let’s say you bought a new car for $35,000, but an accident leaves it totaled and you still owe $30,000 on your loan. However, because of depreciation, your car may be valued at just $28,000. A standard auto insurance policy would only pay for the current market value of the vehicle at the time of the claim – $28,000 in this case. With gap insurance, your insurer would cover the $2,000 difference, keeping you from paying the amount out of pocket.
So, how do you know if gap insurance is right for you? First, are you currently leasing or financing a vehicle? If yes, you should look at how much you still owe on your loan versus how much your car is actually worth (use a site like Kelley Blue Book to get an accurate estimate). If you’re “underwater” – meaning your loan exceeds your vehicle’s value – gap insurance could provide additional peace of mind.
It's also recommended that you consider gap insurance if:
Whatever your needs, Mylo’s friendly licensed advisors are experts at finding the right coverage for you, so you can hit the road with confidence. Get a personalized consultation today!