Many people ask the question, “What is Gap Insurance?” Well it’s rather simple actually, and it’s a type of insurance that just about anyone with a monthly payment should have, if you don’t have it you are definitely taking a risk without gap insurance for cars.

Whilst many car outlets mis-sell Gap Insurance, it is in fact quite simple in how it works. A person will buy a car for, say, 15k brand new and have payments set up to cover this amount over a period of time. Their comprehensive insurance will cover the car in the case of a write off, but only up to its existing value. Therefore, if the car suffers from rapidly dropping residual values, the owner will be left with quite a substantial “gap” to pay to ensure the car is fully paid for. A 20k car could be worth 12k within 2 years leaving the owner with a potential shortfall of 8k.

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.

An important thing to remember is that to obtain ‘Gap’ insurance you have to make the decision to get it as soon as you get a new car loan, it’s a one shot deal. If you don’t get the ‘Gap’ insurance with your new car loan you won’t ever be eligible to get ‘Gap’ insurance coverage on your vehicle and you could end up having to pay a large sum of money because of an accident.

ALA.co.uk supply Vehicle Replacement Insurance – This product will cover the difference between your motor insurers settlement figure and the cost of buying a brand new vehicle, equivalent to the vehicle you had before. Get a quote and buy online now!