If you don’t have the patience to read my post, then check out this video from YouTube about gap insurance. It does a pretty good job at explaining why you may need to add gap insurance coverage to your Georgia car insurance policy. If you’re still confused, let me break it down for you.

• Gap insurance is…

Gap insurance is the type of coverage that you add to your  car insurance policy to fill the gap between the actual cash value of your car and the amount that you actually owe on it. When you total your car, the amount that you own on it isn’t taken into mind when calculating what your claim payment will be, so this can be very important.

Right now I’m making payments on a 2007 Chrysler PT Cruiser. We owe about $16,500 on the car right now, but it’s only worth around $12,000. If we were to total that car today and we didn’t have gap insurance, then after our claim payment came through, we would be without a car and we would still owe over four thousand dollars on our car.

• Who requires it?

Gap insurance is only necessary to add to your  insurance coverage if you’re still making payments on a car. Most of the time, your financer or car dealership will require you to purchase gap insurance much like they require you to purchase comprehensive or collision insurance on your new vehicle. They do this to protect their investment.

In order to buy gap insurance, your insurance policy must already have collision and comprehensive coverage on it. You cannot purchase gap insurance otherwise.

The reason why people need gap insurance is because, unless you put a sizable down payment on a new car, then in the time soon after you have bought it you will be in an upside down loan, which means that you will owe more than the car is worth. This happens because new cars depreciate very rapidly.