Gap Insurance: Keep Or Toss?

Gap insurance is an optional type of car insurance that covers the difference between what a car is worth and what the driver owes on their auto loan or lease if the car is stolen or written off. It is worth considering if you have a small loan, a long-term loan, or a car that depreciates quickly. You can get gap insurance from your car insurance company, loan provider, or dealership. It is not required by state law, but it may be required by lenders and lessors.

Gap insurance covers the difference between the balance on a car loan or lease and the car's depreciated value

Gap insurance is an optional type of car insurance that covers the difference between the balance on a car loan or lease and the car's depreciated value. This type of insurance is designed to protect drivers from being stuck paying the remaining loan or lease balance on a vehicle that they can no longer drive due to it being stolen or totalled in an accident.

Gap insurance is particularly useful for those who have made a small down payment on their vehicle, have a long-term loan, or have a car that depreciates quickly. It is also often required by lenders and lessors.

When considering whether to purchase gap insurance, it is important to keep in mind that it is not required by state law and may not be necessary if you have already paid off most of the loan balance, made a significant down payment, or could afford to pay the gap yourself in the event that your car is stolen or totalled.

The cost of gap insurance varies depending on where you purchase it. Dealerships and banks typically charge a lump sum of up to $700, which is added to your auto loan and accrues interest. On the other hand, insurance companies usually charge a much lower rate of around $20 to $40 per year when gap insurance is added to an existing car insurance policy.

When deciding whether to keep your gap insurance, it is important to consider your financial situation, the value of your car, and the terms of your loan or lease. If you are concerned about covering the gap between the depreciated value of your car and the balance of your loan or lease in the event of an accident or theft, then keeping your gap insurance may be a good idea. However, if you feel that you could cover this gap yourself or that the cost of the insurance outweighs the potential benefit, then you may want to consider cancelling it.

Gap insurance is worth the money if you owe more on your car loan than the car is worth

Gap insurance is an optional type of car insurance that covers the difference between the amount owed on a car loan and the car's worth in the event of theft or a total loss. It is worth the money if you owe more on your car loan than the car is worth.

Gap insurance is worth it if you finance a car with a low down payment, have a long-term auto loan, or lease a vehicle. It is an affordable way to protect yourself from the risk of a big expense if your car is stolen or totaled. It is especially useful if you've made a small down payment on your vehicle, have a long-term loan (more than four years), or have a car that depreciates in value quickly.

For example, if you buy a $50,000 car with a $10,000 down payment, after three years, the car is worth $20,000, but you still owe $24,000 on the loan. If the car is totaled in an accident or stolen, your normal insurance policy will pay $20,000, or the car's actual cash value, minus your deductible. Without gap insurance, you will still owe $4,000, and you will still have to pay off the car even though you can't drive it. But if you have gap insurance, it will pay the $4,000.

Gap insurance is never required by state law, and few lenders or lessors require it, so the decision to buy it depends on your financial situation. You should consider purchasing gap insurance if any of the following applies to you:

• You made a low down payment and have a large auto loan.
• Your car depreciates quickly.
• You roll other products into your auto financing.
• Your car has high mileage.
• You have a long-term loan.

The cost of gap insurance varies depending on where you buy it. Dealerships and banks charge a lump sum of up to $700 for gap insurance, making them the most expensive choice. Since the sum is usually added to your auto loan, you will have to pay interest on it, too. The best deals on gap insurance are generally available from car insurance companies, which charge as little as $3 per month for coverage.

In summary, gap insurance is worth the money if you owe more on your car loan than the car is worth. It can protect you from having to pay off a car that you can no longer drive and provide peace of mind in the event of theft or a total loss.

Gap insurance can be purchased from most major insurance companies, including Progressive, Nationwide, State Farm, and Allstate

Gap insurance is an optional type of auto insurance that covers the difference between the amount owed on a car loan or lease and the car's actual cash value (ACV) in the event of theft or a total loss. It is designed to protect drivers from being left with a large bill to pay off a vehicle that they can no longer drive. While not required by state law, gap insurance may be required by lenders and lessors. It can be purchased from most major insurance companies, including Progressive, Nationwide, State Farm, and Allstate, as well as dealerships, lenders, and lessors.

Progressive offers loan/lease payoff coverage, which is similar to gap insurance. The main difference is that Progressive's loan/lease payoff coverage is limited to no more than 25% of the vehicle's value, though the exact limit varies by state. Progressive's coverage is available to those who already have comprehensive and collision coverage on their policy.

Nationwide offers gap coverage as an optional, add-on insurance coverage for newer cars that can be added to a collision insurance policy. It is available in select states and applies to vehicles six years old or less.

State Farm offers Payoff Protector coverage, which is very similar to gap insurance.

When purchased from a dealership, gap insurance typically costs between $400 and $700 as a one-time payment. When added to a car insurance policy, it usually costs between $20 and $40 per year. It is important to note that gap insurance is not the same as full coverage, but it can be included as part of full coverage if required by a lender or lessor.

You can get a gap insurance refund for unused premiums if you paid upfront and cancelled early

If you have paid upfront for gap insurance and decide to cancel it before the end of the policy period, you may be eligible for a refund on the unused portion of the coverage. This is because gap insurance refunds are typically issued when you have paid for coverage in advance and there is still time remaining on your policy. The amount of the refund will be prorated based on the length of time left on the policy and the original cost.

To obtain a refund, you must first cancel your gap insurance policy. You can do this by contacting your insurance agent or company and informing them of your intention to cancel. They will provide you with the necessary paperwork, which may include a gap insurance cancellation form, an odometer disclosure statement, and a letter from your lender verifying that your auto loan has been paid off. It is important to note that you will not be eligible for a refund if you have filed a claim against the policy.

Once you have submitted all the required documentation, you should receive your refund. Most insurance companies offer the option of receiving the refund through a physical check or direct deposit.

It is worth noting that the process and eligibility for obtaining a gap insurance refund may vary depending on the insurance company and your specific policy. Therefore, it is always a good idea to carefully review the terms and conditions of your policy before initiating the cancellation and refund process.

Gap insurance is not required by state law but may be required by lenders and lessors

Gap insurance is not mandated by state law, but lenders and lessors may require it. This is because gap insurance covers the difference between the value of a car and the amount owed on a loan or lease in the event of an accident or theft. This can protect lenders and lessors from car owners who walk away from a loan or lease if their car is stolen or totaled.

Gap insurance is an optional type of car insurance that covers the "gap" between what a car is worth and what the driver owes on their auto loan or lease if the car is totaled or stolen. Without gap insurance, drivers may be stuck paying the remaining loan or lease balance on a vehicle that they can no longer drive. Standard types of insurance only cover the actual cash value of the car, so a driver without gap insurance could potentially owe thousands of dollars to their lender.

For example, if you buy a $50,000 car with a down payment of $10,000, and three years later, the car is worth $20,000, but you still owe $24,000 on the loan, and the car is totaled in an accident or stolen and declared a total loss, your normal insurance policy will pay $20,000 (the car's actual cash value) minus your deductible. If you don’t have gap insurance, you’ll still owe $4,000, and you’ll still have to pay off the car even though you can’t drive it. But if you do have gap insurance, it will pay the $4,000.

Gap insurance is worth considering if you made a small down payment, lease your car, or have a car that depreciates quickly. It is also worth considering if you have a long-term loan, as long-term loans almost guarantee that the car buyer will have negative equity for some time. The average car loan today has a 72-month term, according to Experian Automotive, and the longer it takes to pay off a loan, the longer it takes for loan payments to catch up with the car’s depreciating value.

The cost of gap insurance varies depending on where you buy it. Dealerships and banks charge a lump sum of up to $700 for gap insurance, making them the most expensive choice. Since the sum is usually added to your auto loan, you will also have to pay interest on it.

The best deals on gap insurance are generally available from car insurance companies, which charge as little as $3 per month for coverage. Instead of charging a lump sum, insurers include the cost in your regular premium payments.

Frequently asked questions