If you are like many people who took out a loan in order to purchase a vehicle, you have probably discovered that the value of your vehicle is now less than what you still owe on it.  In some cases, the gap between what you owe and the value of your vehicle can be quite large, which means you will be left in a terrible financial situation if your vehicle is totaled in an accident.  While this possibility is disturbing regardless of your financial situation, if you are one of the thousands of people who has been left without a job or who is otherwise struggling to make it by, getting stuck with paying on a vehicle you no longer own is even more frightening.  Therefore, if you don’t already have it, you might want to consider adding gap insurance coverage to your auto policy.

What is Gap Insurance?

As the name implies, gap insurance is coverage that is meant to fill the “gap” between what you owe on your vehicle and the vehicle’s current value. For example, if you are involved in an accident and your vehicle is damaged to the point where repairing it will cost more than replacing it, the insurance company will consider it to be a total loss.  Instead of paying for repairs to the vehicle, the company will reimburse you for the cost of replacing the vehicle.  If the vehicle is valued at $10,000, but you still owe $15,000, you will be stuck with having to pay the $5,000 difference.  This means you are still stuck with making a car payment, but you don’t have a car to show for it.  With gap insurance, the insurance company will pay off what you owe on the vehicle if it is totaled rather than only paying the value of the vehicle.

How Do I Get Gap Insurance Coverage?

You may be surprised to learn that there are actually a couple different options available for obtaining gap insurance.  When you purchase your vehicle, the lending institution may offer gap insurance coverage to be included with your lending agreement.  Or, the car dealership may sell gap insurance coverage to you with your purchase.  Another option is to contact your insurance company and to have gap insurance coverage added to your policy.  Regardless of where you purchase it from, gap insurance coverage usually does not cost a whole lot.  Therefore, it is a good idea to add this coverage to your policy, just be sure to compare offers in order to select the least expensive option.