What Is The Difference Between Loss of Use And Gap Insurance

Anyone who purchases insurance for an automobile can attest to the wide array of options and prices available. Like people not every insurance or provider is identical so knowing what your needs are and what to look for in coverage is very important.

The two types that many people wonder about is loss of use and gap insurance. Let's first start with gap insurance many people are not fully aware of what this is for but if you lease a car it will be something to consider. When most people buy a car it depreciates in value the moment they drive it off the lot. If a person does not have a substantial down payment they could quite possibly owe more on the loan than what the vehicle is worth.

Gap Insurance

If something were to happen, say a person drove into a ditch by mistake and damaged no one else but totaled their automobile. Their insurance would cover say $20,000 but the car loan is $25,000 the person with gap insurance would have to pay the deductible which is in the range of $500 to $1,000 but would not have to pay the total $5,000 difference because their gap insurance would cover them.

When determining whether gap insurance would be suitable for a persons needs they must ask themselves if they were to total the vehicle could their finances absorb the shock of paying the difference between what the vehicle is worth and what they owe on it? In most cases gap insurance is well worth it however a person must shop for the best possible coverage at the lowest possible price.

Loss of Use

Loss of use insurance is something different than what most people are accustomed to purchasing. Most people are aware they need insurance if their car is damaged in an accident of if they hurt someone but what would a person do if their vehicle was a victim of theft or arson or a crash.

Your vehicle will take time to repair and in the interim you will need a vehicle for your daily activities especially if it is used for work purposes. Loss of use insurance will allow a person to rent a vehicle during the time it takes to replace the current one out of use. Imagine how much it would cost to rent a car for one, two, three weeks or longer? That would put a damper on the finances of most people.

Loss of use insurance is not automatically offered by every provider so it is something to ask about and seriously consider. Paying a few extra dollars now may yield larger benefits in the future.