What Is Gap Insurance and How Does It Work?

[On screen] Do I Need Loan or Lease Gap Coverage?

[Voiceover] Buying a new car is a major purchase — and an exciting one.

Congratulations!

Don’t forget to think about your insurance needs.

The coverage you had on your previous vehicle may not be sufficient for your new car.

New car replacement coverage is one type of optional coverage you may want to consider.

You may choose to purchase this in addition to the coverage you are required to buy.

Most lenders typically require comprehensive and collision coverage.

These coverages help pay to replace a totaled car, but they factor in depreciation.

Due to depreciation, your new car loses value as soon as you drive it off the lot.

Say you bought a new car for $25,000.

Shortly after, your car was totaled in a covered collision.

Your collision coverage would pay up to the car’s depreciated value — for example, $20,000.

That wouldn’t be enough money to buy the same brand-new car that costs $25,000.

But, if you had new car replacement coverage, you would be able to replace your totaled car with a new one of the same or similar make, model and equipment.

If you own a brand-new car, consider adding this optional coverage to your car insurance policy.

Check with your insurer to see if your vehicle qualifies.

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