Gap Insurance: Vw Loan Standard?

Gap insurance is an optional, additional auto insurance coverage that helps pay your car loan if your car is lost or stolen and you owe more than the vehicle is worth. It is not a requirement for a VW loan, but it can be purchased from a car insurance company or dealership. The cost of gap insurance varies depending on the provider and can range from a few dollars a month to hundreds of dollars a year. It is recommended to shop around and compare prices before purchasing gap insurance.

How does gap insurance work?

Gap insurance, or guaranteed asset protection, is an optional form of coverage that can be added to a full coverage policy. It is intended to cover the difference between the amount you owe on your auto loan and the amount your insurance company pays out if your car is stolen or deemed a total loss.

Gap insurance is designed to protect you from depreciation. Once you buy your car, its value starts to decrease. If you finance or lease a vehicle, this depreciation leaves a gap between what you owe and the car's value. For example, if you owe $25,000 on your loan and your car is only worth $20,000, gap insurance will cover the $5,000 difference, minus your deductible.

To qualify for gap insurance, you must have comprehensive and collision coverage on your policy. Gap insurance is typically offered by car insurers and dealers, and can also be purchased from your auto lender. It is important to compare prices and coverage before buying, as the cost of gap insurance can vary.

Gap insurance only pays out if your total loss claim is approved, and the settlement you receive does not cover your outstanding loan amount. It does not cover your insurance deductible, and it will not pay out if your car is damaged but not declared a total loss.

What does gap insurance cover?

Gap insurance covers the difference between what you owe on a car lease or loan and the amount paid out in a total loss settlement from an auto insurer, minus your deductible. This is only applicable if you owe more on your car than it's worth.

Gap insurance covers what's owed on a car after a total loss, whether that's the result of an accident or vehicle theft. It pays out after comprehensive and collision coverage, which are typically required when you buy or lease a new vehicle. Comprehensive and collision insurance only pay what a car is worth at the time of a theft or accident. So, when you owe more on your car loan or lease than that, gap insurance covers that amount.

Gap insurance does not cover your comprehensive or collision deductible. Your deductible is the amount your insurance subtracts from a claim payout.

Gap insurance does not cover theft, engine failure, transmission failure, death, your car insurance deductible, overdue payments and late fees on your car loan or lease, extended warranties, carry-over balances from previous loans or leases, lease penalties for high mileage or excessive use, charges for credit insurance connected to the loan, or a down payment for a new car.

Is gap insurance worth it?

Gap insurance is a type of supplemental coverage that can be added to your comprehensive and collision coverages. It pays the difference between your car's actual cash value, or "ACV", and the amount you currently owe on your loan or lease when your car is totaled in a traffic accident or stolen.

Gap insurance is worth it if you lease a vehicle or have a loan. It is also worth it if you cannot afford to pay the difference between the amount you still owe and the value of your car. If you have a large car loan or you bought a vehicle that quickly depreciates in value, gap insurance becomes a better bet.

However, gap insurance is not worth it if you do not have a car loan or a lease. It is also not worth it if your loan is paid down below the value of your car. If the amount you owe is less than the car’s value, or only a little more, there’s no reason to keep gap insurance.

The cost of gap insurance depends on several factors, including the actual cash value of your vehicle when you purchase your gap policy, and your previous claims history. Gap insurance is typically inexpensive, costing an average of $61 a year.

How to get gap insurance

Gap insurance is an optional, additional coverage that can be added to your collision insurance policy. It covers the difference between the balance of a lease or loan on a vehicle and its actual cash value (ACV) in the event of a total loss.

You can buy gap insurance from a car insurance company or a dealership. It is generally cheaper to buy it through your car insurance company, as you won't be paying interest on the cost. However, it is important to note that not all car insurance companies provide gap coverage, and it may not be available in all states.

If you are considering buying gap insurance from a dealership, check your auto loan contract to see if it is required, as not all lenders require it. You should also be aware that the cost of gap insurance from a dealership is often rolled into your loan payments, meaning you will pay interest on it.

When buying gap insurance from a car insurance company, you will need to add it to an existing policy that includes comprehensive and collision coverage. You can typically only add gap insurance to your policy if your car is no more than two to three years old and you are the original owner.

• Progressive
• Allstate
• State Farm
• USAA
• Liberty Mutual
• Nationwide

Cost of gap insurance

The cost of gap insurance depends on various factors, including whether you buy it from a dealership or an insurance company, your state, driving record, age, vehicle, and loan amount.

Dealerships typically charge up to $600 for gap insurance that can be added to your loan. This option is usually more expensive than buying gap insurance from an insurance company because you pay interest on it. According to United Policyholders, a nonprofit consumer group, lenders charge a flat fee of around $500 to $700 for gap insurance.

The Insurance Information Institute states that adding gap coverage to a car insurance policy with collision and comprehensive insurance typically increases your premium by around $40 to $60 per year. Auto insurers usually charge a few dollars a month for gap insurance or around $20 a year. Forbes Advisor's analysis puts the average cost at $61 a year. Trusted Choice, a group of independent insurance agents and brokers, reports that insurance companies offer cheaper rates because commissions on this type of insurance aren't regulated.

Factors Affecting the Cost of Gap Insurance

The cost of gap insurance depends on individual factors, such as your car's value. The larger the loan, the more expensive the gap insurance. Additionally, gap insurance is more expensive for older vehicles, with specific requirements varying by insurer. Generally, a vehicle must be no more than two to three years old to be eligible for gap insurance.

Frequently asked questions