As a new car owner you need to be aware of the fact that your car's value diminishes the moment you drive it off the lot. The fact is that it's worth considerably less than when you took the keys. If you're like most people you had to take out financing in order to buy the car. Depending on how much you put down you probably owe more than the car is worth the instant you hit the street. If you happen to become involved in an accident and the car is totaled, the insurance company will only compensate you for the actual value of the vehicle, so you could conceivably end up paying for a wrecked car before the ink is dry on the contract. That type of situation can be avoided simply by buying the right kind of insurance--gap insurance. Following are few tips on how to buy gap insurance.

What Is Gap Insurance?

Guaranteed Auto Protection (GAP) insurance is an insurance policy that covers you in the event your vehicle is stolen or damaged during the period in which you owe more than the car is worth. It covers the 'gap.' Gap insurance can be invaluable because your new vehicle not only loses value as you drive it off the lot, but continues to decrease in value for the first few months you own it--up to 30% of its original cost. That being the case a gap policy could be one of your best purchases.

Shop for the Best Deal

In order to avoid the possibility of having to pay for a car you can no longer drive a gap insurance policy could be a very good investment. You need to shop around for an insurance carrier that offers gap insurance at reasonable rates. Call various insurance companies, including the one you presently deal with, and ask for a price quote for gap insurance. It would be a good idea to go on the Internet and get some cheap insurance quotes from online sources to compare them with. Usually you can find gap insurance at reasonable rates, but shopping for the best deal never hurts.

Stand-Alone Policies

If you're unable to find reasonably priced gap insurance through your usual provider, or by searching online insurance carriers, you may opt for a stand-alone policy, which is generally offered through an auto dealership. Unfortunately a stand-alone policy is significantly more expensive than a policy you would get through an insurance company, so even though you may not be entirely satisfied with the prices quoted by the various insurance companies you researched; it may still be your best option.

You Must Be Fully Covered

To qualify for gap insurance, you are required to have full coverage on the vehicle. If your new car is financed it is mandatory to carry full coverage anyway, so that shouldn't be an issue. The lender insists on enough coverage so they are assured of getting their payments. Having gap coverage assures that both you and the insurance company are fully protected.

Gap Coverage for Leased Vehicles

Because the payments on a leased vehicle are usually less than the monthly payments for a car you actually purchase, the amount of the 'gap' can be significant. In the event the leased vehicle is extensively damaged, a gap policy will cover you. That's necessary because you'll still be expected to make the payments. In fact, most lease agreements have this stipulation written into them.

Read the Fine Print Before Signing

You would do well to make sure you fully understand the details of a gap policy before signing any papers. Read the fine print and make sure the policy doesn't contain any surprises. If there is something you don't understand, don't hesitate to have your agent explain it to you.