Don’t Get Caught Out When You Buy A New Car – Take Out Gap Insurance

'Gap insurance' is a term that you will be familiar with if you have recently bought a car.

It is now standard for a car dealer to try and sell you gap insurance at an over inflated rate when you try and buy a car, and more often than not the customer will be put off by the extra expense.

There are two things that everyone who is not sure about purchasing gap insurance should know however. Firstly, you don't have to buy gap insurance from the dealer when you buy the car, you can get it much cheaper online. Secondly, it is a common mistake to ignore gap insurance altogether but it is a big mistake to do so. Allow me to explain why. Gap insurance is so called because it refers to the 'gap' between what an insurance company will pay out in the case of a car being written off and the amount you owe on a car.

The overwhelming majority of insurance companies will only pay out the current market value of the car in the case of a total loss which, if you have had the car for two years for example, will be considerably less than you paid for it.

If you have taken out gap insurance you will receive a lump sum of the difference between what the collision insurance company pays out and what you still owe on the car.

Imagine a scenario where you have bought a car on finance or with a personal loan for 15,000 paying 300 a month and 1 year in you have an accident and the car is written off.

You contact the insurance company and they say they will pay you back the market value of the car, which is now only 11,000.

You have made a year's worth of payments totalling 3,600 and still owe 12,400 on the car.

If you have taken out gap insurance you will receive the 1400 difference between what you have received from your collision insurance company and what you still owe on the car.

If you have not taken gap insurance out it will leave you having to find an extra 1400 from your own pocket to pay your finance company or bank. So you will often hear people asking the question 'gap insurance is it worth it '?

The answer is most definitely 'yes'.

In addition if you decide you want to buy gap insurance there is no need to pay a fortune, if you go online and shop around you will find some great deals.

If something happens to your new car it may be the best purchase you ever made.
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