Orlando Harmon
Gap insurance, sometimes called guaranteed asset protection, is an optional add-on insurance coverage for newer cars that can be added to your collision insurance policy. In North Carolina, gap insurance can help cover the gap between an auto insurance claim payout and your remaining loan balance if your car is declared a total loss or stolen and unrecoverable. This type of insurance is designed to help when a vehicle is totaled and the owner still owes money on their car loan.
| Characteristics | Values |
|---|---|
| What is it? | Insurance that covers the "gap" between an auto insurance claim payout and the remaining loan balance if the car is declared a total loss or stolen and unrecoverable |
| When is it useful? | When the payout from a collision or comprehensive coverage claim doesn’t cover the remaining balance on the loan |
| When to use it? | When the car is determined to be both undrivable and a total loss, meaning the cost of repairs exceeds the value of the vehicle |
| Who needs it? | People who have made less than a 20% down payment, financed their vehicle for 60 months or longer, have a vehicle lease, purchased a vehicle that depreciates quickly, or rolled negative equity over from an old car loan |
| Who provides it? | Allstate, Liberty Mutual, Nationwide, Progressive, and Travelers |
| Cost | Depends on insurance provider, vehicle type, location and other personal rating factors |
What You'll Learn
When is gap insurance useful?
Gap insurance is useful when your car is declared a total loss or is stolen and unrecoverable. In these situations, your insurer will pay out the vehicle's actual cash value (ACV), which takes into account depreciation. However, if the depreciated value of your car is less than the amount you still owe on your loan, you will be left with a gap that you will have to pay out of pocket. This is where gap insurance comes in.
Gap insurance is particularly useful for new vehicles, which can depreciate by roughly 10% upon leaving the dealership and up to 45% of their value within the first year of ownership. It is also useful for luxury and sport vehicles, which depreciate quickly.
In North Carolina, gap insurance is not required by state law, but your lender might require it. It is also useful to note that gap insurance is usually cheaper to purchase from an insurance company than a dealership.
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How does gap insurance work in North Carolina?
Gap insurance, or guaranteed asset protection, is an optional coverage that can be purchased from an insurance company or car dealership. It covers the difference between the value of your vehicle and the remainder of your loan if your vehicle is in a total loss accident or stolen.
In North Carolina, gap insurance is not required by state law. However, if you are financing your vehicle, your lender may require you to have it. It's important to note that not all insurance companies offer gap insurance, and even if they do, there are certain criteria that must be met for a vehicle to be eligible. These criteria include:
- The car is less than 2-3 years old.
- You have comprehensive and collision coverage.
- You are the original owner.
If you meet these criteria and decide to purchase gap insurance, it will cover the "gap" between the actual cash value (ACV) of your car and the remaining loan balance if your car is declared a total loss or stolen. This is especially relevant for new vehicles, which can depreciate by up to 45% in the first year of ownership.
For example, let's say you recently bought a new car with a $25,000 loan. You get into an accident and have to pay a $1,000 deductible, but your car's depreciated value is only $21,000. Your collision insurance will help pay for the repairs, but you'll only receive a $20,000 payout. With gap insurance, the remaining $5,000 owed on your loan will be covered.
The cost of gap insurance in North Carolina can vary depending on the insurance provider, vehicle type, location, and other factors. It typically costs between $2 and $30 per month and can be purchased from dealerships, banks, or insurance companies. Remember to compare quotes from multiple providers to find the best rates.
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How much does gap insurance cost in North Carolina?
The cost of gap insurance in North Carolina varies depending on factors such as the insurance provider, vehicle type, location, and other personal rating factors. On average, adding gap coverage to your car insurance costs $89 per year, or $2 to $30 per month. The average cost of a full-coverage car insurance policy in North Carolina is $1,713 per year, but the addition of a gap insurance endorsement will vary this cost.
It is worth noting that gap insurance is typically only required for one to three years or until the vehicle is worth more than the remaining loan or lease amount. It is also worth comparing costs between insurance providers and dealerships, as purchasing gap insurance from a dealership may result in a higher cost due to added interest.
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Where can you buy gap insurance in North Carolina?
In North Carolina, gap insurance can be purchased from insurance companies, car dealerships, auto loan lenders, banks, credit unions, or specialised providers.
Some of the insurance companies that offer gap insurance in the state include:
- Allstate
- Liberty Mutual
- Nationwide
- Progressive
- Travelers
- Frankenmuth Insurance
- Auto Club Group – ACG (AAA)
- Auto Club Enterprises (AAA)
- CSAA Insurance (AAA)
While dealerships can be a convenient place to obtain gap insurance, they may charge a higher premium than a traditional insurance company. It is recommended to compare quotes from multiple providers to find the best rates.
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How do you cancel gap insurance?
Gap insurance, sometimes called guaranteed asset protection, is an extension of your auto insurance that covers the difference between the actual cash value of your car and the amount left on your auto loan if your vehicle is declared a total loss or stolen and unrecoverable. In North Carolina, gap insurance is not required by the state, but your lender might require it.
To cancel your gap insurance, you should first consider the following:
- Check the terms and conditions of your gap insurance policy. You may be charged a cancellation fee even if you cancel within the first few days of purchasing the policy. Some insurers will charge up to 50% of your premium if you cancel within 60 days, while others may charge 25% or nothing at all.
- Check whether you will have any gaps in your coverage if you cancel. If you still owe money on your vehicle, cancelling your policy could leave a gap between the balance of what's owed on the vehicle and what insurance would pay out if it were stolen or written off.
- Check whether you need to have an active replacement policy in place before you cancel your current policy.
Once you are ready to cancel, you can do so by:
- Contacting your insurer, who can provide you with a form to fill out to cancel your policy.
- Submitting a written request, including your name, address, and vehicle identification number (VIN).
- Cancelling online, although this may only be available if you received coverage through an insurance company, not a dealership.
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Frequently asked questions
Gap insurance, or guaranteed asset protection, is an optional insurance coverage for newer cars that can be added to your collision insurance policy. It covers the "gap" between an auto insurance claim payout and your remaining loan balance if your car is declared a total loss or stolen and unrecoverable.
Only some cars are eligible for gap insurance in North Carolina. Insurers may only offer gap insurance if the car is less than 2-3 years old, you have comprehensive and collision coverage, and you are the original owner.
You can use gap insurance if your car is determined to be undrivable and a total loss, meaning the cost of repairs exceeds the value of the vehicle.
The cost of gap insurance in North Carolina varies depending on factors such as the insurance provider, vehicle type, and location. The average cost of a full-coverage car insurance policy in the state is $1,713 per year.
