Georgia Gap Insurance: Cooldown Periods Explained

Gap insurance in Georgia is an optional insurance policy that covers the difference between the depreciated value of your car and what is still owed on it in the event of a total loss or theft. While not required by law, it is highly recommended for those who lease or finance a new car, as it can provide financial protection and peace of mind. The cost of gap insurance varies, but it is generally cheaper when purchased through an auto insurance company rather than a dealership or lender. In Georgia, there is a 30-day free look period during which consumers can cancel their gap coverage without penalty.

What is Georgia gap insurance?

Georgia gap insurance is an optional type of insurance policy that protects you financially in the event of an accident that results in your vehicle being considered "totalled" (i.e. too costly to repair) or your car being stolen. It is designed to cover the difference between the depreciated value of your car and what you still owe on your car loan or lease. This type of insurance is particularly relevant for newer cars, as their value can depreciate quickly after being driven off the dealer's lot.

Gap insurance in Georgia is used when something happens that renders your car a total loss. This could be in an accident, but it could also be the case if your car is stolen and not recovered, or if your car is destroyed in a natural disaster, such as a tornado, flood or hurricane. If this happens and there is no chance your car can be repaired, you should receive a payout from your insurance company for the car's actual cash value (ACV).

The problem arises when the ACV is less than what you owe on your car loan or lease. This is because your car loan or lease is generally based on the vehicle's new retail price, but depreciation begins immediately after purchase. The depreciated value of the car will probably be less than what you paid for it and may be less than what you still owe on the loan.

Gap insurance does not apply to all vehicles. It typically covers brand-new vehicles and those up to one model year old. It is often purchased in conjunction with your car loan. However, it may not cover situations where you owe more on a loan or lease because you have traded in a vehicle that you still owe money on.

In Georgia, you can purchase gap coverage from the car dealer, your lender, or your auto insurer (if offered). The cost of gap insurance varies but is generally cheaper when purchased through an auto insurer rather than a dealer or lender.

When is it applicable?

Gap insurance in Georgia is applicable when a vehicle is considered a total loss, either due to an accident, theft, or natural disaster. It covers the difference between the depreciated value of the car and the outstanding loan or lease amount, ensuring that individuals don't have to continue payments on a car that is no longer usable. This type of insurance is particularly relevant for new cars, as their value can depreciate quickly, leaving individuals with a gap between the insurance payout and their remaining debt.

While gap insurance is not required by law in Georgia, it is often required by lenders or leasing companies until the vehicle is paid off. It is typically applicable to brand-new vehicles or those up to one model year old, and it can be purchased from dealerships, car insurance companies, or lenders.

To be eligible for gap insurance, individuals must have comprehensive and collision coverage as part of their auto insurance policy. Additionally, there may be specific criteria set by the provider, such as vehicle age, ownership history, and mileage limits.

Gap insurance provides financial protection and peace of mind for individuals with new car loans or leases, ensuring they are not left with significant debt in the event of a total loss.

Where can you buy it?

Gap insurance is available from a variety of sources in Georgia. You can purchase it from your car insurance company, a stand-alone gap insurance policy provider, your car dealer, or the bank/financial institution that offered you a loan for your car.

It is important to note that not all car insurance companies offer gap insurance, so you may need to shop around to find the best plans and prices. Some of the major car insurance providers in Georgia that do offer gap insurance include State Farm, Progressive, Berkshire Hathaway, and Allstate.

When deciding where to purchase gap insurance, it is worth considering the cost. Buying gap insurance from a dealership or lender may be more expensive than buying it from an insurance company, as the cost of coverage from a dealer or lender may be bundled into your loan amount, resulting in interest charges. Additionally, dealerships and banks typically charge a lump sum for gap insurance, whereas insurance companies usually offer it as an add-on to your existing policy.

How much does it cost?

The cost of gap insurance in Georgia varies depending 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 Georgia is $1,604 per year, according to a 2023 rate analysis by Insurance.com. However, this cost can range from $20 to $300 per year, with the majority of plans costing no more than $1–$5 per month.

USAA, a car insurance company, offers gap insurance for approximately $1,202 per year on average, making it the cheapest option. Auto-Owners and Nationwide are also known for their affordable gap insurance plans.

It is worth noting that gap insurance purchased through a lender or car dealer can be significantly more expensive than adding this coverage to an existing car insurance policy. Experts recommend shopping around and comparing quotes from at least three insurance providers to find the best price.

Is it required by law?

While gap insurance is not required by law in Georgia, it is often beneficial to have. It is an optional type of insurance policy that can provide financial peace of mind and protection. Many lenders will require that you carry gap coverage until you pay off your vehicle.

Gap insurance is designed to protect car owners if their car is stolen or deemed a total loss, meaning it is too costly to repair. It pays the difference between the depreciated value of your car and what is still owed on the car loan or lease. This is especially useful if you have a newer car, as the value of the car depreciates almost immediately after driving it off the dealer's lot.

In Georgia, you can purchase gap insurance from car dealers, lenders, or auto insurers (if offered). It is recommended when a purchased or leased vehicle's actual cash value threatens to fall below its loan amount, as in cases with a long loan term or small down payment.

Frequently asked questions