As soon as you drive your new car off the parking lot of a dealer, it would have depreciated by 10%

Now, try and imagine if you get into an accident in that vehicle or if the car gets stolen. What will the insurance company pay you if the vehicle is totaled (deemed inoperable or not road worthy)? That's right, they'll pay you what it's currently worth. And, as we all know, vehicles depreciate rapidly; especially in the first few years or when it is taken off the car dealer's lot.

So, what do you do to avoid this insurance gap? Actually, there's nothing you can do about that insurance gap. You could purchase a vehicle that has gone through most of its depreciation. But, there is still going to be a gap between what you owe and what the insurance company is willing to pay.

GAP (Guaranteed Auto Protection) Insurance fits its name - it fills in the gaps that conventional insurance cannot cover. It's a great idea for anyone buying a new vehicle (GAP insurance must be purchased within 90 days of vehicle purchase and the maximum term is 84 months for autos; 72 months for motorcycles and watercraft).

Do you need to get GAP Insurance if you're buying a used car? A good rule of thumb is this: get the vehicles current Blue Book value at www.kbb.com. Then, subtract the amount of your loan. If you have a negative number or if the vehicle is newer than two years, you might want to look into GAP Insurance.