Auto insurance is necessary in most states, but many people don’t realize that gap insurance may also be useful. There is a key difference between auto insurance and gap insurance, mainly that gap insurance helps cover the difference between what we pay and the outstanding principal on a vehicle loan. If you’re still confused, we at Karla Salmon Insurance in Oviedo, FL can help you understand the differences.

What is Gap Insurance?

Gap insurance is a separate type of insurance policy that helps reimburse you if your vehicle is totaled. In many cases, your car may not be fully paid off. If you have standard auto insurance, you may be stuck paying for the remainder of your loan, as auto insurance only provides payments based on the original balance of the vehicle.

If you’re funding through a car loan, then you’ll likely have added fees, interest, and extra charges added to your loan. Gap insurance is designed to help cover those costs when auto insurance only gives enough for the car’s value. Hence, it can benefit some drivers to purchase gap insurance at an additional charge.

The Main Difference Between Gap and Auto Insurance

Auto insurance and gap insurance serve different purposes. Auto insurance is primarily for accidents and injuries, providing coverage for damage up to a specific limit. On the other hand, gap insurance is specifically designed to bridge the ‘gap’ between insurance payouts and the remaining balance of your vehicle loan.

Who Needs Gap Insurance?

Not everyone needs gap insurance. In fact, if your vehicle is paid off, then you likely won’t need it. Drivers who have vehicle loans would benefit the most from gap insurance. So, if you’re ready to discuss, our team at Karla Salmon Insurance in Oviedo, FL is happy to help.