INSURANCE

Gap insurance is a common purchase for new car loans and lease agreements. Gap insurance is a great type of insurance that has helped many people not incur extra expenses when their vehicle was totaled. But, as with any insurance, gap insurance is not always needed. Unfortunately many consumers don't know their rights and often end up purchasing and paying for gap insurance without knowing and maybe without needing it.

GAP INSURANCE REQUIREMENTS

First, let's take a look at when gap insurance is required. Generally every lease agreement requires gap insurance, and for the right reasons because this is a great protection for the buyer. The buyer is still financially responsible for the leased car even though the car is still owned by the manufacturer or dealership. Usually gap insurance is built into the lease agreement and is part of the lease terms.

CONSUMER RIGHTS

Other than lease agreements, generally gap insurance is not required. But for reasons of ignorance or greed, many dealerships or car loan departments often automatically add gap insurance to the buyers loan and sometimes without the buyer being aware of this. When purchasing a new car you do have the right to deny gap insurance. Before you deny gap insurance though, make sure you don't need it.

WHEN GAP INSURANCE IS NOT NEEDED

Although gap insurance is highly recommended in many new car purchases, in some cases gap insurance is not needed. If someone has enough cash reserves to cover the gap in the insurance payoff and the value of their car, then they would not need gap insurance if they would rather use their money than insurance to cover that gap. Also, some insurance companies already provide gap insurance, or a similar loan pay off type of insurance, built into the vehicle's auto insurance policy, so obviously it would make no sense to pay for an insurance policy that one would already have. And, some loan companies offer a pay off benefit in the loan agreement. This means that the loan company will take care of the gap in value. In addition, some people may be purchasing a vehicle that is not over priced and therefore if the car was totaled, the vehicle would have the same value as the loan payoff.

HOW TO REFUSE GAP INSURANCE

So, you are not leasing a vehicle and you have researched your need for gap insurance and realize you don't want to purchase it. Tell your dealership or lender. That is all you should need to do to refuse gap insurance. Next, before you sign your loan papers, make sure you get an itemized list of everything that is included in your loan payment and make sure you are not paying for gap insurance or anything else that you did not authorize. If you still have problems, since gap insurance is a form of insurance and its sale is regulated by your state, you can contact your state insurance commissioner for further help in securing your rights to refuse gap insurance.

Purchasing gap insurance is important for many. If you are buying a new car or leasing, in most cases it is a must. But, when it comes time to purchase that gap insurance policy, have you thought about what company you want your gap insurance through?

Usually when one goes to buy a car the dealer will ask you who you are using for your car insurance. Typically this is not the case with gap insurance. Most dealers "package" the gap insurance right in with your new car purchase or lease. But, is this a good idea and is this the only way to get gap insurance?

Getting gap insurance through the car dealership is not a bad idea, if you understand how gap insurance works and you are working with a dealership who is knowledgeable about gap insurance. If your dealership does not understand the gap insurance policy then they won't be able to answer your questions. However, if you are working with a reputable dealership that you trust, you have studied about how gap insurance works and you understand your gap insurance policy, then purchasing gap insurance through the dealership is convenient and generally is not any more expensive than finding your own gap insurance policy.

If you decide not to use the dealership for your gap insurance needs, then you can find gap insurance policies online. You may have to have this done before you purchase your car and especially before you lease your vehicle so the dealership can verify that you have purchased a gap insurance policy. Finding gap insurance online will probably not be a major cost savings, but since you will be working directly with an insurance company, they will be able to better serve you and help you understand what coverages you will have with gap insurance.

Before you purchase gap insurance through your dealership or online, there are a few things you will want to understand first:

1. Always check first with your insurance company to see if they already include gap insurance in your car insurance policy. There is no reason to purchase gap insurance if you already have the coverage.
2. Another place to check to see if gap insurance is already included is from the financing company. Some financing companies will cover any additional "gaps" in coverage if your car is totaled which would eliminate the need for gap insurance.
3. Make sure you need gap insurance. If you are putting a large amount down on your vehicle or if it is an older vehicle, you don't always need gap insurance.
4. And finally, it is important to remember that you can purchase gap insurance even after your car purchase. So, if you did not purchase it at the dealership you can still find a gap insurance company online or locally and take advantage of the benefits of a gap insurance policy.