What is CIP-GAP Insurance?

CIP-GAP insurance will insure one for the difference between what one would owe on a vehicle and what an insurance company says it's worth. This insurance is a must for someone who is considering purchasing a new vehicle since a new vehicle depreciates right after it is driven off the dealer's lot.Gap insurance covers the difference between what the car is worth and what you owe on the car. It comes into play if the car is stolen or totalled while the owner is still making payments.

CIP-Gap insurance for buyers

For buyers, gap insurance only makes sense if you expect to be "upside down" on the car. If you made a low down payment, if you bought a car that depreciates rapidly, if you have a high interest rate or if you rolled over other costs, such as money owed on a trade-in, into your new-car payments, gap insurance makes sense. Most buyers, particularly those who made a healthy down payment, will always be right-side-up on the car, and therefore don't need gap insurance.

CIP-Gap insurance for lessors

In the case of a lease, even though you aren't buying the car outright, you are responsible for the cost of the car if it is stolen or totalled. Because lease payments -- and therefore the amount of money you have tied up in the car -- is significantly lower, the difference between what you have paid and the value of the car can be huge -- therefore gap insurance is much more critical for a lease. In fact, many lease contracts require it.

Who should buy CIP-gap insurance:

People who are leasing a car or who expect to owe more than the car is worth for a significant amount of time.