The cancellation of the insurance policy and starting of the new one should have a minimum gap although it is possible to have no gap each company works on its own schedule you will get a gap in the whole process. To stay insured during this time period you can get a GAP insurance.

Gap Insurance

When you lease a car the GAP insurance is a must and with a down payment at the time of leasing, GAP insurance can work wonders at the time of a disaster. What it really does is to cover the difference between the actual value of the car before it gets stolen or totaled and the amount you still owe to the financing company. A simple example can help you understand why GAP insurance should be taken especially with new cars. Let's assume you bought a brand new car of $30,000. You start paying the each month at a certain rate. in a couple of months you run into a car accident and the insurer's advisor says the car is a total loss. In this case, the insurance company will pay you the money but on the basis of Actual Cash Value of the car. You will be surprised to hear that the amount insurance company will pay you will be around $25,000. Why? Because the time you take the car out of the lot on to the road its value start depreciating. The depreciation is subtracted form the cars value and then the amount left is paid to you. But the financing company is not going to let go a single penny and will be asking for the entire amount of $33,000 dollars minus the payments you have already made. Now there is Gap of $8,000 in just a few months and that is indigestible. GAP insurance will play a vital role in providing you this extra cost and you will not have to pay this huge sum out of your pocket.

Is GAP Necessary?

Well this question really depends on the type of insurance coverage you have. Some coverage's may pay you the entire amount of the car and in that case there is no need of purchasing GAP insurance. But if depreciation is taken into account then you may need it. This insurance is mandatory for the leased cars and is built in the price of the leasing.

Things to Remember

If you are going to buy GAP insurance then you should know some things. First is that this coverage can be purchased any time and it is not necessary to purchase it when you lease. In this way you may be able to find a better rate. You have to get the collision and comprehensive insurances too other wise the GAP insurance may not get honored.

OEM vs. Aftermarket

One more important thing that you need to know is the aftermarket market parts are cheaper than the original manufacturer parts and the insurance companies usually discourage the use of original parts because they save a lot in the after market parts. If original parts are used then the consumer is made to pay a certain cost which can be a huger sum because original parts may be twice as much as the aftermarket ones. The aftermarket parts can be of low quality can reduce life and resale of the car. There are companies that use original parts only but they are generally expensive. If you are buying a new car then you should sign a policy that will use only original parts.