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Gap Car Insurance New Mexico NM

Reader’s Question:

Why is it necessary for me to get gap insurance if I will have a loan on my new car here in New Mexico? Wouldn’t that just cost me too much for my car insurance?

Aaron

Santa Fe, NM

It’s not as bad as it seems if you are thinking about the cost of gap car insurance when you take a loan for a new car. When you have a financed car and you get in an accident wherein your car is totalled and you are eligible for a compensation on the car, your car insurance provider in New Mexico will pay you the actual cash value of your car. However, the finance company or the bank would still want the exact amount that you owe them and it can have a huge difference from the amount your insurer will pay you. Because you are accountable for the payment of your car loan even if your car is totalled, you may have to pay up to thousands, but not if you have gap insurance.

Your gap insurance will pay the difference between the amount that your car insurance provider will pay for the actual cash value of your car when it is totalled and the amount that you still owe on your car loan. You might think that if your new car is totalled, you get the same amount of the car when you purchased it. However, once you drive the car away from the dealer, you have immediately lost the payment for things such as licensing, documentation, etc. Hence, the value of the car will already be different when you got it and when it was totalled.

Tags: car, car dealer, car insurance, gap insurance