Gap Insurance: Aarp's Coverage Options

AARP members can purchase gap insurance as additional coverage for their financed or leased vehicle through the company's auto insurance program. Gap insurance, or Guaranteed Asset Protection Insurance, covers instances when a leased or financed vehicle is stolen or totaled by bridging the gap between the vehicle's actual cash value and the amount left on the loan or lease.

Gap insurance covers the difference between a car's value and the loan owed on it

Gap insurance is an optional type of car insurance that covers the difference between a car's actual value and the balance left on the loan or lease. In the case of a total loss, gap insurance covers the "gap" between the amount reimbursed by the driver's car insurance policy and the amount they still owe on their financing.

Gap insurance is important because new vehicles tend to lose their value very quickly, which often leaves drivers in a position of owing more on their vehicle than it's worth. In the event that a vehicle that you've leased or financed is stolen or totaled, gap insurance bridges the "gap" between what the vehicle is worth (its actual cash value) and the amount left due on your loan or lease.

Your standard auto insurance policy helps pay for repairs and replacement based on the actual cash value (ACV) of your car. That's the amount the car is worth on the current market, which decreases or depreciates over time. So, if someone steals your car or it's totaled in an accident, the money the insurance company gives you may not be enough to pay off your car loan because you owe more than your vehicle is worth. This is where gap insurance can help you.

If your car is stolen or considered a total loss after an accident, your gap insurance helps pay the difference between the actual cash value of your car and the amount you owe on your loan. However, it doesn't help pay for your annual deductible, a down payment on a new car, rental cars while your vehicle is being repaired, aftermarket equipment costs, balances from prior loans or leases that are included in the new agreement, or vehicles that were originally leased or financed as a used car and were previously titled or owned before you.

Gap insurance is only available if you're the original loan or leaseholder on a new vehicle. Your car must be new and not previously owned or titled to be eligible to purchase gap insurance. Additionally, you'll need to get collision and comprehensive coverage when you buy gap insurance.

AARP members can purchase gap insurance as additional coverage

Gap insurance covers instances when a leased or financed vehicle is stolen or totaled. It bridges the "gap" between the vehicle's actual cash value and the amount left on the loan or lease. This is important because new vehicles tend to lose value quickly, which can leave drivers owing more on their vehicle than it's worth. In the event a vehicle is stolen or deemed a total loss, the driver will still have to pay off the loan. Standard comprehensive insurance and collision coverage will only pay for the car's actual cash value. Gap insurance protects drivers from owing money on a car they no longer have.

To purchase gap insurance, AARP members can call The Hartford at (888) 413-8970 for more information or to receive a quote. The Hartford is the insurance company with the AARP car insurance contract.

It's worth noting that gap insurance is typically only available if you're the original loan or leaseholder of a new vehicle. Additionally, you'll need to get collision and comprehensive coverage when you buy gap insurance.

Gap insurance is important because new vehicles lose value quickly

Yes, AARP offers gap insurance. Gap insurance is important because new vehicles tend to lose value very quickly, which can leave drivers owing more on their vehicle than it's worth. This is known as depreciation. Generally, new cars depreciate by 30.5% in their first year.

Gap insurance, or Guaranteed Asset Protection Insurance, covers instances when a vehicle that you've leased or financed is stolen or totaled. It bridges the "gap" between what the vehicle is worth (its actual cash value) and the amount left to pay on the loan or lease.

For example, if you still owe $10,000 on a car loan but your car is only worth $4,000, gap insurance can cover the difference between the two, up to your policy limit. This protects you from owing money on a car you no longer have.

Gap insurance is especially important for those who have made a small down payment (less than 20%) on their car or who have a long loan payoff period. In these cases, the driver may owe more than the car's current value. Gap insurance can also be useful for those who have leased a vehicle, as it's often required for a lease.

It's worth noting that gap insurance doesn't cover every scenario. For instance, it won't cover your car insurance deductible, overdue payments and late fees on your car loan or lease, extended warranties, or carry-over balances from previous loans or leases.

Lenders often make gap insurance a requirement of a loan

For example, if you owe $24,000 on your loan and your car is worth only $20,000 when it's totaled, gap insurance would cover the $4,000 gap. Purchasing gap coverage ensures that you don't have to make loan or lease payments for a car you can no longer drive.

Gap insurance is especially important if you've made a small down payment on your vehicle, have a long-term loan, or have a car that depreciates in value quickly. In these cases, you will likely owe more on your car loan than the car is worth, and gap insurance can protect you from having to pay that difference out of pocket.

You can purchase gap insurance from your car insurance company, your loan provider, or the dealership. However, it's important to note that gap insurance purchased from a dealership or lender will be more expensive because it is added to your principal, which is then used to calculate your interest. On the other hand, car insurance companies typically charge just $20 to $40 a year for gap insurance coverage.

Gap insurance can be purchased from insurance companies, banks, credit unions, and car dealerships

Gap insurance is an optional coverage that offers financial protection if your vehicle is stolen or totaled. It covers the difference between the amount you owe on your car loan and the car's actual cash value (ACV) or market value. This type of insurance is especially useful if you have a new car with a substantial loan amount, as new cars tend to depreciate quickly and can leave you owing more than the car's worth.

You can purchase gap insurance from insurance companies, banks, credit unions, and car dealerships. Here's a closer look at each option:

Insurance Companies

Insurance companies like AARP offer gap insurance as an add-on to your existing policy. You can typically add gap coverage to a new or existing car insurance policy as long as your loan or lease hasn't been paid off. Buying gap insurance from an insurance company may be more affordable than other options, and you won't pay interest on your coverage. It is recommended to compare quotes from multiple insurance providers to find the best rate.

Banks and Credit Unions

Banks and credit unions also sell gap insurance. For example, the Associated Credit Union of Texas and Greater Texas Credit Union offer gap insurance to their customers. This option may be convenient if you already have a relationship with a particular financial institution.

Car Dealerships

When you buy or lease a car, the dealer may offer gap insurance as part of the purchase or loan agreement. In some cases, gap insurance may even be included automatically unless you specifically decline it. However, buying gap insurance from a dealership can be more expensive since the cost of coverage is bundled into your loan amount, resulting in additional interest charges.

In summary, while gap insurance can be purchased from insurance companies, banks, credit unions, and car dealerships, it is important to compare prices and coverage options to find the best deal. Additionally, keep in mind that gap insurance is not a legal requirement, but it can provide valuable financial protection if your vehicle is stolen or totaled.

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