Although many dealers will claim that you can only purchase gap insurance through them at the time of the purchase, in fact you can enroll in gap insurance anytime within the first twelve months of your purchase. Of course, the longer you wait to enroll, the less cause you have for it. After the first few years that you've owned your car, you will no longer need gap insurance, since the car's real value and the amount of your loan that remains is more approximately equal.

The good thing about gap insurance is how reasonable it is to purchase. At only a few dollars a month, it can fit the budget of most new car owners. What stops people from purchasing gap insurance isn't usually the cost of the coverage, but their relative ignorance that it even exists. Loan companies won't tell you about it, nor will car dealers. They are guaranteed their money regardless. And if they do offer gap insurance at the time that you buy your car, you can often find a better rate on your own.

One of the reasons car buyers aren't familiar with gap insurance is that it isn't offered in all states. In fact, it isn't even offered by some insurance companies. Connecticut, Louisiana, Maine, Nebraska, New Hampshire, New Mexico, New York, Virginia and Washington are states that don't offer gap insurance, although drivers in those states can petition the state Insurance department in order to encourage lawmakers to make it available. Similarly, those who now have an auto policy through a company that doesn't offer gap coverage can request that their carrier add gap insurance as an option.

If you own an older vehicle and don't anticipate buying a new one anytime soon, it is probable that you will never need to know what gap insurance . But for those of you who are ever planning to buy a new vehicle that might require financing, gap insurance can be an indispensable--and affordable--alternative to paying out-of-pocket for an accident or theft that isn't your fault.

Tristan Andrews is a writer for California Car Insurance.