The market value of your vehicle and the amount that you owe on the loan for that vehicle can be very different. For example, if you purchase a new vehicle, its value depreciates dramatically once you drive it off the lot. The same can apply within the first few months or years of owning a car based on the mileage and wear and tear. When you purchase an auto insurance policy, the market value of the vehicle is often used to determine your coverage. Thus, there can be a “gap” between the value covered by insurance and what you actually owe for the car. Gap insurance for MA auto loans offers a solution to this problem.
What Is Gap Insurance for MA Auto Loans?
Gap insurance is not a substitute for regular car insurance but rather an add-on to an auto insurance policy. It covers the gap between what you owe on a car loan and the cash value of the car. This is important in situations where your car is stolen or an accident results in a total loss. Without gap insurance, you would have to pay for the difference out of your own pocket if your insurance is not enough for you to pay off the auto loan. If you purchased your car with cash or with a large down payment, then you probably do not need gap insurance coverage.
Purchasing Gap Insurance Coverage
You have the option to purchase gap insurance as part of your auto loan financing or as part of your auto insurance policy. In most cases, the cost is higher with the first option as finance companies are not regulated by the state on what they can charge whereas insurance companies are regulated. Find out whether gap insurance is automatically included in your financing before purchasing a policy from your insurance company to avoid double paying for this coverage. There are also certain exclusions and limitations that may apply. Speak to a local insurance agency for more information on gap insurance for MA auto loans including the cost and exclusions.