What is Gap Insurance and

is it something that I need?

Guaranteed Auto Protection (GAP) Insurance is insurance you can buy so that if the vehicle is totaled, it covers the difference between what you owe on that vehicle and the amount the insurance company says the vehicle is worth. Many factors determine if you should or should not buy GAP Insurance. Also, GAP insurance can vary, so always read the contract before signing.

Are you putting a large down payment on the vehicle? If so, GAP may not be a wise choice. If you already have a good bit of equity in the car (30 or 50%), then the vehicle insurance coverage should be enough to pay off the vehicle if it is totaled. However, there are exceptions.

Do you drive a lot of miles? If so, GAP may be a good choice. Even if you put 20% down on the vehicle, with a lot of miles, GAP might be a good thing to consider as the amount the insurance company would pay, if it was totaled, would be lower.

Length of loan can effect the decision as to whether to buy it or not. If you are financing for a short time, you will probably pay the principal amount down quicker than the vehicle loses value. If you are financing for four, five or more years, it may be a good thing to purchase the GAP insurance.

There is not an easy answer. GAP insurance definitely has benefits and should be considered. However, depending on the length of time you finance the loan, how much you drive and, if you have any money down or equity in the vehicle, will determine if GAP insurance is a right decision for you. Also, you may want to price different GAP policies. There really are a vast array of prices in the marketplace.