1. Gap Insurance, What Is It?
Gap insurance, also known as Guaranteed Asset Protection insurance, is a type of insurance coverage that helps protect you financially if your car is totaled or stolen and the amount you owe on the car loan is higher than the actual cash value of the vehicle.
What Exactly Does Gap Insurance Cover?
When you purchase a new or used car and finance it with a loan, the value of the car depreciates over time. In the event of an accident or theft, your auto insurance policy typically covers the current market value of the car, which may be significantly less than the amount you still owe on your loan. This difference between the car’s value and your outstanding loan balance is known as the “gap.”
2. Is Gap Insurance Worth It?
Is it worth it? The answer lies in one word, Depreciation!
Standard Auto Insurance policies cover a depreciated vehicle at the current market value. But what if you owe more on the car than it is worth? GAP IT! That is when you will see it is worth it.
It is designed to bridge that gap by paying the difference between what your car insurance company pays and the remaining balance on your loan. It helps ensure that you are not left with a financial burden of making payments on a car you no longer have.
3. When do you need gap insurance?
Here are 5 easy reasons to say yes…IF:
- You made less than a 20 percent down payment, GAP IT!
- You financed your vehicle for 60 months or more, GAP IT!
- You are leasing your car and…
- You purchased a vehicle that depreciates faster than the average, GAP IT!
- Have a high-interest rate on your loan.
4. When can you skip Gap Insurance?
You can skip this coverage when your loan balance doesn’t exceed the vehicle’s value.
It’s important to note that this coverage is typically optional and not required by law. However, it can be beneficial in certain situations, especially if you have a large loan amount, a high-interest rate, or if you’re financing a vehicle with a high rate of depreciation.
5. How much is Gap Insurance?
The answer may be “cheap.” Like all types of insurance, there are multiple rating factors such as age, vehicle, and location. All of these combine to create the rate for your specific vehicle. There is no blanket price for any insurance.
The cost varies depending on factors such as the type of vehicle, the loan amount, and the insurance provider.
6. Should you buy Gap Insurance from a dealer?
You don’t have to buy it from the dealership. Do your research to find the perfect rate for you. Some companies like A Plus Insurance do the shopping for you! Give us a call and our friendly Agents will get you a quote in minutes!
Gap can be purchased from your auto insurance provider, a dealership, or an independent insurance company.
7. How long do you need Gap Insurance?
If it is a new vehicle, then you need will need it for at least the first couple of years you own it. By then, you should owe less on the car than it is worth. If leasing, for most companies, it is a requirement.
Before purchasing, it’s advisable to review your auto insurance policy and consult with your insurance agent to understand the coverage limits, terms, and conditions to ensure it meets your specific needs.
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Gap Insurance Explained
Gap insurance, also known as Guaranteed Asset Protection, is a type of coverage that protects you from paying out of pocket if your car is totaled or stolen and its value is less than what you owe on your loan.
Frequently Asked Questions
- Gap insurance, what is it?
Gap insurance covers the difference between your vehicle loan balance and its actual cash value if your car is totaled or stolen. - Is gap insurance worth it?
Yes, especially if you owe more on your car than it’s worth. It keeps you from paying out of pocket for a car you no longer own. - When do you need gap insurance?
You need it if you financed or leased a car, made a small down payment, or your car depreciates quickly. - When can you skip gap insurance?
Skip it if your loan is close to your car’s value or your car is paid off. - How much is gap insurance?
Gap insurance costs about $20–$40 per year if added to your insurance policy, or a few hundred dollars if bought from a dealership. - Should you buy gap insurance from a dealer?
Dealers often charge more for gap insurance than your insurer. Compare before you buy. - How long do you need gap insurance?
Until your loan balance is less than your car’s actual value, usually for the first few years.
📞 Need advice? Call 1.888.445.2793 for help.
Last Updated on by Brian Muse