Arizona Gap Insurance: What's Covered?

Gap insurance, or guaranteed asset protection, is an optional coverage in Arizona. It bridges the gap between the amount you owe on a car loan and the car's actual cash value. This type of insurance is valuable if you owe more on your car than it is worth. The average cost of gap insurance in Arizona is $1,731 per year, with rates varying depending on factors such as the value of the car, the insurance company, location, and age. It is worth considering if you have a lease or loan agreement, have paid only 20% of your auto loan, or have financed a car for more than 60 months.

How does Arizona gap insurance work?

Arizona's gap insurance works by paying the difference between what your car is worth and what you owe on your car loan if your vehicle is stolen or totaled. It doesn't pay for a new or replacement vehicle. Instead, it ensures that you don't have to continue making payments on a car that is a total loss.

For example, if you buy a car worth $25,000 and it's totalled in an accident, your insurer will pay the actual cash value of your car, which could be $19,000. If you still owe $20,000 to your lender, you will be required to pay the remaining $1,000 of the loan without gap insurance. With gap insurance, you won't have to pay this remaining amount.

Gap insurance is designed to protect automobile owners if their car is totaled or stolen. It is not cheap, with an average cost in Arizona of $1,731 per year, according to a 2023 rate analysis by Insurance.com. The cost of gap insurance depends on factors such as the value of your car, the insurance company, your location, and your age. It is recommended to compare quotes from at least three insurance providers before making a decision.

Gap insurance is optional in Arizona, but if you have a lease or loan agreement, your lender will likely require you to purchase it. You can drop the coverage once your car loan is lower than the value of your car. It is a good idea to purchase gap insurance in Arizona if you have only paid 20% of your auto loan, financed a car for more than 60 months, or lease your vehicle.

Additionally, depreciation should be considered. A new car can lose about 20% of its value in the first year of ownership and more than 10% each year over the next four years. This means the payout you receive for the value of the car is likely to be much less than what you owe for at least the first few years.

Cheapest Arizona gap insurance companies

Gap insurance is designed to protect automobile owners if their car is stolen or written off, paying the difference between the amount owed on a car loan and the car's actual cash value. While gap insurance is not mandatory in Arizona, it may be required by your lender if you have a lease or loan agreement.

According to a 2023 rate analysis by Insurance.com, the average cost of gap insurance in Arizona is $1,731 per year. However, the cost of gap insurance can vary depending on factors such as the value of your car, the insurance company, your location, and your age. It is recommended to compare quotes from multiple providers before purchasing gap insurance.

• Geico: $1,014 per year
• Nationwide: $1,092 per year
• Auto-Owners: $1,101 per year
• State Farm: rates vary
• Travelers: rates vary

It is important to note that gap insurance rates can also differ based on your city within Arizona. For example, gap insurance costs are the cheapest in Willcox, Arizona, at $1,291 per year, while Phoenix has the most expensive rates at $2,067 per year.

Additionally, the cost of gap insurance increases for younger drivers. In Arizona, a 20-year-old driver can expect to pay about $4,115 per year for gap insurance, while a 30-year-old driver would pay closer to $1,886 per year for the same coverage.

Average cost of Arizona gap insurance

The cost of gap insurance in Arizona varies depending on where you buy it. If you buy it from a dealership or loan provider, it will be much more expensive, averaging between $500 and $700. However, if you buy it from an insurance company, it will be cheaper, ranging from $20 to $208 per year.

The cost of gap insurance is influenced by factors such as the make and model of your vehicle and its depreciation rate. For example, a $40,000 Toyota with minimal depreciation may cost around $50 or less per year for gap coverage, whereas a $100,000 Range Rover with a high depreciation rate may cost $150 or more per year.

It's worth noting that gap insurance is typically only necessary during the first two to three years of financing, as these are the years when your auto loan is likely to be "upside down," meaning you owe more than the car is worth. Additionally, gap insurance is usually required when leasing a vehicle.

When considering the cost of gap insurance, it's important to weigh it against the potential benefits. Gap insurance provides valuable protection by covering the difference between the current value of your car and the remaining loan balance if your vehicle is totaled or stolen. This can save you from having to make payments on a car you can no longer drive.

When to buy Arizona gap insurance

Arizona residents can purchase gap insurance from a dealership, lender, or car insurance company. While convenient, buying gap insurance from a dealer or lender can be more expensive. For more affordable gap insurance, Arizona drivers can turn to their insurance company.

Gap insurance is optional coverage in Arizona. However, if you have a lease or loan agreement, your lender will most likely require you to purchase gap insurance. But you can drop the coverage as soon as your car loan becomes lower than the value of your car.

Gap insurance is designed to protect automobile owners if their car is totaled or stolen. It covers the difference between what your insurer pays for your totaled vehicle and what you still owe. For example, if you get into an accident and the repairs to your vehicle cost more than its value, your car insurance will only cover the depreciated value of your car. Gap insurance covers the remaining loan balance, ensuring that you don't have to continue payments on a car that is a total loss.

• You have paid only 20% of your auto loan
• You have financed a car for more than 60 months (five years)
• You lease your vehicle
• You made less than a 20% down payment on your vehicle
• Your loan is 60 months or longer
• You purchased a vehicle with a naturally high depreciation rate
• You drive a lot, increasing the depreciation rate (over 15,000 miles per year)
• You have an average loan term (72 or 84 months)
• You rolled over negative equity from a previous car loan

The cost of gap insurance in Arizona depends on factors such as the value of your car, the insurance company you choose, your location, and your age. The average cost of gap insurance in Arizona is $1,731 per year, according to a 2023 rate analysis by Insurance.com. However, it is recommended to compare quotes from multiple sources before making a purchase, as rates can vary.

Who should buy Arizona gap insurance?

Arizona residents who lease or loan their car should consider purchasing gap insurance to protect themselves financially. Gap insurance is designed to protect car owners if their car is totaled or stolen. It covers the difference between the amount you owe on a car loan and the car's actual cash value.

Gap insurance is particularly beneficial for those who:

• Have paid only 20% of their auto loan
• Have financed a car for more than 60 months (five years)
• Lease their vehicle
• Have chosen a long payoff period
• Have made a small down payment
• Have a long finance period
• Have purchased a vehicle that depreciates quickly
• Have rolled over negative equity from an old car loan into a new loan

Additionally, it is important to note that gap insurance is optional in Arizona and can be expensive, with an average cost of $1,731 per year. It is recommended to compare quotes from multiple sources before purchasing.

Frequently asked questions