Gap Insurance: Where To Buy

Gap insurance can be purchased from a variety of sources, including car dealerships and insurance companies. When buying or leasing a new car, dealerships often offer gap insurance as an option during financing discussions. However, purchasing gap insurance from a dealership can be more expensive since the cost is bundled into the loan amount, resulting in interest payments on the coverage. On the other hand, insurance companies typically allow you to add gap coverage to an existing policy or a new one, provided that the loan or lease hasn't been paid off. Buying gap insurance from an insurance company is often more cost-effective, and you won't have to pay interest on the coverage. It is worth noting that some insurance companies may only offer a limited time frame to purchase gap coverage.

From a dealer or insurance company

You can purchase gap insurance from a dealer or an insurance company. If you're buying or leasing a new car, the dealer will likely ask if you want to purchase gap insurance when you discuss your financing options. Buying gap insurance from a dealer can be more expensive if the cost of the coverage is bundled into your loan amount, which means you'd be paying interest on your gap coverage.

When buying gap insurance from an insurance company, you can typically add gap coverage to an existing car insurance policy or a new policy, as long as your loan or lease hasn't been paid off. It may be less expensive than buying from a dealer, and you won't pay interest on your coverage. If you already have car insurance, you can check with your current insurer to determine the cost of adding gap coverage to your existing policy. Note that you need comprehensive and collision coverage to add gap coverage to a car insurance policy.

Some insurance companies that offer gap insurance include Progressive, Nationwide, State Farm, and Allstate.

Buying from a dealer

When you buy or lease a car, the dealer will likely ask if you want to purchase gap insurance when you discuss your financing options. Buying gap insurance from a dealer can be more expensive as the cost of coverage may be bundled into your loan amount, resulting in interest payments on your gap coverage.

Buying from an insurance company

You can typically add gap coverage to an existing car insurance policy or a new policy, provided your loan or lease hasn't been paid off. Buying gap insurance from an insurance company is often cheaper than buying from a dealer, and you won't pay interest on the coverage.

If you already have car insurance, you can inquire with your current insurer about adding gap coverage to your policy. Note that you need comprehensive and collision coverage to add gap coverage to your car insurance.

Insurance companies that offer gap insurance

Several insurance companies offer gap insurance, including:

• Progressive
• Nationwide
• State Farm
• Allstate

When buying or leasing a new car

Buying Gap Insurance from a Dealer

When you buy or lease a car, the dealer will likely ask if you want to purchase gap insurance when you discuss your financing options. Buying gap insurance from a dealer can be more expensive if the cost of the coverage is bundled into your loan amount, which means you'll be paying interest on your gap coverage.

Buying Gap Insurance from Your Auto Insurer

You can typically add gap coverage to an existing car insurance policy or a new policy, as long as your loan or lease hasn't been paid off. Buying gap insurance from an insurance company may be less expensive, and you won't pay interest on your coverage. If you already have car insurance, you can check with your current insurer to determine the cost of adding gap coverage to your existing policy. Note that you need comprehensive and collision coverage to add gap coverage to a car insurance policy.

Gap insurance makes sense for people who put no money down and choose a long payoff period since they may owe more than the car's current value. You may want to consider gap insurance if you:

• Made less than a 20% down payment
• Financed for 60 months or longer
• Leased the vehicle (gap insurance is generally required for a lease)
• Purchased a vehicle that depreciates faster than average
• Rolled over negative equity from an old car loan into the new loan

You may be able to skip gap insurance if:

• You made a down payment of at least 20% on the car when you bought it
• You're paying off the car loan in less than five years
• The vehicle is a make and model that historically holds its value

Cost of Gap Insurance

Gap insurance costs an average of $61 a year, but the cost can vary depending on the insurer. Buying gap insurance from a car dealership might seem convenient, but it can often be more expensive than purchasing it through a car insurance company. Car dealerships typically charge up to $600 for gap insurance that can be added to your loan.

As an add-on to an existing policy

If you already have a car insurance policy, you can check with your current insurer to see if they offer gap insurance as an add-on to your existing policy. Many major auto insurers, including State Farm, Nationwide, Progressive, Allstate, USAA, AAA and Esurance, offer gap insurance as an add-on to an existing policy. However, not all insurers offer this option, so you may need to shop around.

Adding gap insurance to your existing policy will usually be the cheapest option, although you may have to pay the deductible, which means you will still be out of pocket to some extent.

If you decide to go with this option, you will need to have comprehensive and collision coverage in place to add gap coverage to your car insurance policy.

It's worth noting that gap insurance is only necessary if you have a car loan or lease. If you fully own your car, you don't need gap insurance.

From a bank or credit union

Buying Gap Insurance from a Bank or Credit Union

Gap insurance, or guaranteed asset protection, is an optional form of financial protection for your vehicle. It covers the difference between the amount you owe on your car loan or lease and the car's value in the event of theft or damage. This type of insurance is particularly useful if you've made a small down payment, have a long-term loan, or own a car that depreciates quickly.

When considering purchasing gap insurance from a bank or credit union, it's important to weigh the pros and cons to make an informed decision. Here are some key points to keep in mind:

Pros:

• Banks and credit unions typically offer competitive rates for gap insurance, which can help you save money. They may offer lower premiums compared to dealerships or auto insurance companies.
• By purchasing gap insurance from a bank or credit union, you avoid the potential issue of paying interest on the insurance cost if it's rolled into your car loan. This can result in significant savings over time.
• Banks and credit unions often have a wide range of financial products, so you may be able to bundle your gap insurance with other services, which can lead to additional discounts or convenience.

Cons:

• The process of purchasing gap insurance from a bank or credit union may be more complicated or time-consuming compared to buying it from a dealership. There might be more paperwork or steps involved.
• Banks and credit unions might have stricter requirements or eligibility criteria for obtaining gap insurance. For example, they may only offer gap insurance for newer vehicles or to customers who meet certain credit score thresholds.
• The level of personalisation or customisation in the insurance plan might be limited when going through a bank or credit union. They may have standard plans that may not fit your specific needs as closely as plans offered by dealerships or specialised insurance providers.

When deciding where to purchase gap insurance, it's essential to compare rates, terms, and conditions from multiple providers, including banks and credit unions. Obtaining quotes from different sources will help you make a well-informed decision that best suits your financial situation and insurance needs.

For a used car

If you're looking to purchase gap insurance for a used car, there are a few things you should know. Firstly, gap insurance covers the difference between what you owe on your car and what it's worth. This type of insurance is especially important if you owe more than the car is worth, as it can protect you from having to pay out of pocket in the event of a total loss.

When you finance a used car, the lender puts up the money for the vehicle in exchange for agreed-upon monthly payments. If you total your vehicle and its value does not cover the remainder of the loan, you will be responsible for paying the balance. This is where gap insurance comes in – it will cover the difference and protect you from a substantial personal cost.

Most insurance companies will allow you to add gap insurance to your policy as long as you also have comprehensive and collision coverage. It's important to note that gap insurance is typically only available for vehicles that are less than two to three years old. To qualify, you usually need to purchase a policy within three years of buying your car.

When considering where to purchase gap insurance, you have a few options. You can buy it from your auto lender as part of your loan payments, but this will result in you paying interest on the premium for the policy. Alternatively, you can purchase gap insurance from a dedicated gap insurance firm or from your existing car insurance provider, which will allow you to avoid interest payments. Major insurance companies that offer gap policies include Travelers Insurance, Safeco, Nationwide Insurance, Liberty Mutual, Auto-Owners Insurance, and American Family. USAA also provides this type of coverage for military members and their families.

Before deciding where to purchase gap insurance, it's a good idea to get quotes from at least three insurance companies to ensure you're getting the best price. Additionally, be sure to review the terms and exclusions of the policy carefully to understand what is and isn't covered.

Frequently asked questions