When you are buying a car your car dealer will try hard to persuade you to purchase an insurance policy with your car. This insurance policy includes the gap insurance, which covers the difference between what the car is worth and the amount you still owe on it. For example, the car is worth $20,000 but you still owe $24,000. In the event your car is a total loss, the gap insurance policy will cover the $4,000 difference. Another common type is the credit life insurance. This insurance will pay the balance of your loan if you die before you’ve been able to repay it.
Sometimes these policies do not make sense for consumers. Make sure, you clearly understand what you’re purchasing. Also consider the opportunity to decline the offer and shop around for better prices.
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