When purchasing a car, the buyer is often inundated with optional extras and offers of insurance they “simply must have”, and always at an additional cost. Before making a purchase, it is important to know of all the extras available to you - in the case of Gap Car Insurance, it is an essential if you are paying for your car over a fixed period of time.

For example, let’s say you got into a wreck with a car you purchased two years ago, of course you have comprehensive and full collision coverage. Do you think you will receive money to cover the entire cost of the car? Not even close, if you didn’t know the value of vehicles drops considerably in the first few years after a vehicle comes out, within four years a vehicle will drop in value of up to seventy-five percent. So that twenty thousand pound car that you have been making payments on for the last 2 years is likely only worth around 12 thousand pounds now, which means now you have a difference that you are going to have to pay for out of your pocket.

So to answer the question of what ‘Gap’ insurance is, well it is a type of insurance that will cover the difference between the actual value of a vehicle at the time of an accident and how much someone owes for financing at the time of the accident. So take the above example, the ‘Gap’ insurance would pay up to another eight thousand dollars.

It’s an astonishing percentage of people who are actually upside down on their car loan, it is almost unbelievable. And by “upside down” I mean that they owe more on the car than the car is actually worth, and the reason for this is because of how much the value of new cars drops within the first few years. So at sometime during your lifetime, if you plan on financing a new car, which most people do, then you expect to be upside down on a car at some point in your life. Knowing that, you should know how important it would be for you to get ‘Gap’ Insurance.

Finally, it should also be noted that it is a “must” that the Gap Insurance coverage begins when you buy your car and take out long term finance on it. Most policies will be based upon the value of the vehicle at the time it’s taken out - therefore if you wait a couple of months before getting covered, you may already have suffered some dropping residual value and still be faced with a large bill to foot in the event of an accident.

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