Knowing how much is GAP insurance is important if you want to purchase this class of protection. GAP insurance protects you from paying for a car you can’t drive anymore, which can happen if a vehicle is totaled. This article discusses everything you need to know about buying GAP insurance.
What Is GAP Insurance?
GAP insurance, or General Asset Protection insurance, covers the difference between a car’s worth and the balance the owner owes on its lease or car loan if the vehicle is stolen or can’t be repaired after an accident. This is a benefit you can’t get from standard collision and comprehensive insurance policies, says Bankrate. It’s not mandatory that drivers carry GAP insurance. However, some states require car dealers to offer it to their customers.
How Does GAP Insurance Work?
According to WalletHub, GAP insurance covers the gap between the car’s current value and the amount the owner owes on the loan. If the car is totaled, the GAP insurance will cover the balance left after your standard insurance has paid for the actual cash value of the vehicle. That way, you don’t owe the lender any money after a car is stolen or totaled.
Who Needs GAP Insurance?
The following people may benefit from GAP insurance:
People Who Paid a Small Down Payment on Car Loan
You can get GAP insurance if you only paid a small down payment on your car loan, thus increasing the amount owed on the vehicle.
Lessees
Many auto leases come with GAP insurance because leases tend to have lower monthly payments compared to auto loans and therefore have a wider gap between the amount owed and the vehicle’s actual value.
Sports Car Owners
If your car has a fast depreciation rate, having GAP insurance can help cover the difference between the actual value of the car and the amount you still owe on it in the event of a serious crash or theft.
Drivers Whose Auto Financing Covers Other Products
You can also get GAP insurance if your auto loan covers other products, such as an extended service agreement or debt from other car loans. These additions increase your debt without affecting your car’s value, so you may want to consider purchasing GAP insurance to cover the difference.
Owners of a Vehicle with High Mileage
If your car has a high mileage, it’s value will depreciate faster than you can pay off the loan. Getting GAP insurance protects you from negative equity, says WalletHub.
Where Can I Get GAP Insurance?
Here are places where you can buy GAP insurance:
- Car dealerships
- Lenders
- Banks and credit unions financing your car purchase
- Insurance companies
Which Insurance Companies Offer GAP Insurance?
If you’re looking for GAP insurance, consider the following companies.
State Farm
This insurer doesn’t offer GAP insurance, but buyers that finance their car purchase through a State Farm bank can opt for a feature called Payoff Protector, which functions like GAP insurance. You can qualify for this feature even if your insurance policy is from a different provider, so long as State Farm financed the loan.
Allstate
Allstate’s GAP insurance covers up to $50,000 of the difference between a primary auto insurance settlement and the money owned on the vehicle loan.
Progressive
Progressive’s GAP insurance covers 25 percent of the vehicle’s actual cash value. The company allows policyholders to include GAP insurance on their existing car insurance for as low as $5 per month.
Nationwide
Nationwide provides GAP insurance. However, you must pay a deductible if you file a claim. If you intend to buy their GAP insurance policy, ensure that the deductible is low enough that you can afford it if your vehicle is totaled.
AAA
To qualify for GAP insurance through AAA, your vehicle must have full comprehensive and collision insurance coverage. The company will waive up to $1000 of your deductible in case your car is totaled.
Esurance
This company calls GAP insurance auto loan and lease coverage. To qualify for this company’s GAP insurance coverage, you need full-coverage insurance.
USAA
The company provides a form of GAP insurance called Total Loss Protection for vehicles that are less than seven years old with a car loan of less than $5000. This policy waives up to $1000 of your deductible. Note that only military and military family members can buy USAA insurance policies.
You can also get GAP insurance from Travelers, Safeco, and American Family, according to WalletHub.
How Much Is GAP Insurance?
The cost of GAP insurance depends on the underwriter. Dealerships and lenders charge higher prices for GAP insurance than car insurance companies. Lenders and dealerships sell GAP insurance for a flat rate, typically between $500 and $700, which are the highest rates for this type of policy. Plus, you will pay interest on the sum since it will be rolled into your loan.
Insurance companies, on the other hand, charge an average of $20 to $40 per year for GAP insurance when buyers bundle it into an existing insurance policy. Doing so only increases your comprehensive and collision insurance cost by about five to six percent on the average, which makes it a lot more affordable. If you want to buy a standalone GAP insurance policy, you can expect to pay between $200 and $300, says courtesyacuralittleton.com.
What Factors Affect GAP Insurance Policy Cost?
Factors that can affect the cost of GAP insurance include:
- Vehicle’s actual cash value (ACV)
- Location
- Vehicle age
- Auto insurance claims history
Will I Get a Refund If I Paid GAP Insurance Upfront and then Sold My Car?
In most cases, if you paid GAP insurance upfront and later sold the car, the provider will refund the unused portion of the policy.
Check this out if you need additional information, resources, or guidance on car insurance.
Sources:
What Is GAP Insurance and How Much Is It? | bankrate.com
What Is GAP Insurance & Is It Worth It? | wallethub.com
How Much Is GAP Insurance? | courtesyacuralittleton.com
What Is GAP Insurance on a Car? | caranddriver.com
Everything You Need to Know About Best Gap Insurance | caranddriver.com
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