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What Is Gap Insurance?

By April 27, 2023May 13th, 2024Insurance

Considering Gap Insurance When Purchasing A Car In PA

You might want to think about gap insurance if you’re planning to buy a new or used car in Pennsylvania. Gap insurance is a sort of auto insurance that, in the event of an accident or theft, pays the “gap” between what you owe on your auto loan and the vehicle’s real cash value.

Drivers in Pennsylvania are required to have a minimum amount of liability insurance, but this insurance only protects against property damage and bodily injury to other persons in an accident. It doesn’t cover injuries you might get or damage to your own car.

What Is Gap Insurance?

Gap Insurance is a type of car insurance coverage that helps you pay off an auto loan if your vehicle is totaled or stolen. 

When Is Gap Insurance Recommended?

“I usually recommend gap insurance anytime a client is leasing or purchasing a new car.  A new car loses nearly 5% of its value the first time it is driven off the lot, so there is a good chance that the loan will exceed the value of the car, and the GAP will pick up that difference.” – Patrick Freer

Gap Insurance Helps Cover Financing Costs On Your Vehicle

Gap insurance can help you when you get in an accident with a vehicle that is still under financing. Normally, when a vehicle is totaled, you receive the replacement cost of a vehicle. But, if you finance an automobile, you’ll probably owe more on the loan during the first few years of ownership than the car is worth. This is due to the fact that automobiles lose value fast and your loan payments might not be able to keep up.

Your car insurance provider will only compensate you for the car’s real cash worth in the event of an accident or theft, which can be less than the balance of your loan. This is where gap insurance comes in; it pays, up to the policy limitations, the difference between the car’s real cash worth and the loan balance.

Things To Consider When Purchasing Gap Insurance

When considering gap insurance in Pennsylvania, bear the following in mind:

  • Some Lenders Require Gap Insurance: Although gap insurance is not required by law, if you finance your car, your lender might. Ensure that you review your loan agreement to see whether gap insurance is required.
  • Gap Insurance Is Usually More Expensive At A Car Dealer: If you buy gap insurance through an insurance provider rather than the dealership where you bought your automobile, it will usually be less expensive.
  • Gap Insurance Has A Cap: The amount that gap insurance coverage will pay out is capped. Make sure to carefully read the policy to comprehend the limitations and how they apply to your circumstances.
  • Gap Insurance When You Exchange Your Vehicle: You might be able to terminate your gap insurance coverage and get a refund for any unused money if you trade in your car or pay off your auto loan early.

Get Gap Insurance In Pennsylvania

Overall, if you’re financing a car in Lebanon, Pennsylvania, gap insurance can be a useful type of coverage. Contact Strickler Insurance for gap insurance coverage to protect you from unexpected costs related to your vehicle.  In the event that you are in an accident or your automobile is stolen, it may assist shield you from suffering financial difficulty. Make sure to compare policies to find the best deal, and carefully read the fine print to comprehend the policy limits and how they apply to your circumstances.