How I learned about gap insurance
You may not have heard about gap insurance before, but it can be a useful thing to have if the value of your car is significantly less than what you owe on it. (For example, if you’ve leased a car, or if you’ve bought a brand-new car and driven it off the lot.) Gap insurance pays the difference between what you owe on your car loan or lease and what the insurance company will pay you if there is a loss. It can come in handy.
Unfortunately, I learned about this the hard way. Long ago, my former husband and I leased a brand new minivan. One day he got into it to drive somewhere, and before he even made it onto the street the van caught on fire and burned up. (We never did find out why.) It was completely destroyed. He was lucky to get out, and it was even luckier that our son wasn’t in the van at the time. Not so lucky on the not having heard of gap insurance part though. After our insurance company paid on the loss, we still owed money on the van we no longer had. The van was less than 2 years old.
December 27th, 2006 at 5:40 pm
Gap insurance is great. Another good insurance bet is an umbrella policy. Say you have a $300K auto liability limit, and you or a young family member cause a seven car chain collision on a foggy, rain slicked highway. That three hundred grand will be eaten up quickly, and you’ll be responsible for the rest. But a one million dollar umbrella policy may save your house and nest egg, and it’s not all that expensive either.