Gap Insurance - Get The Coverage You Need

What Does Gap Insurance Cover?

If you are wondering how gap insurance benefits cars, it is essential to understand its coverage features.

Gap insurance covers the difference between what your car is worth when it is totaled in an accident and what you owe on the loan or lease you agreed to when you purchased the vehicle.

Let’s say that you financed your vehicle for 60 months, you are two years into your contract, and the balance on the loan is $20,000. If you get into an accident where your auto insurance company, or the at-fault driver’s auto insurance company, determines the value of the car is only $18,000, you will owe your loan or leasing company $2,000 to pay off the loan. 

However, if you have gap insurance coverage, your auto insurance carrier will pay the $2,000, so you don’t have to come up with out-of-pocket money to pay off the loan or lease.

With the online quoting tool of A-MAX Insurance, you can easily compare auto insurance policies with gap coverage by simply entering your zip code and personal details.

Is Gap Insurance Worth the Extra Premium?

Gap insurance coverage can be very worthwhile if you're in a situation where you owe money on the balance of the loan, and the actual cash value settlement for the vehicle is not enough to pay off the balance.

This is why vehicle gap insurance is required on a leased vehicle and is usually built into the lease. If you are financing your vehicle, ask your auto insurance agency or carrier if gap insurance coverage is offered in the policy.

Although the financing or leasing company for your new car usually offers gap insurance built into your monthly payments, carrying it on your auto policy can be much less expensive.

In fact, according to the reports of CNBC News, purchasing gap insurance through a dealership costs around $700 per year, while it only costs up to around $40 per year from auto insurance companies. However, the costs can significantly vary across providers and locations.

Who Doesn't Need Gap Insurance?

Under the following circumstances, it is not necessary to get a gap insurance policy.

• Low Vehicle Value: Cars that are several years old have already experienced most of their depreciation, meaning there is no gap left to cover. In fact, you can use tools like Kelley Blue Book to estimate your car’s actual cash value.

• Higher Vehicle Value than Loan Balance: If your vehicle's value is higher than what you owe on your loan or lease, there is no purpose for gap insurance. Thus, you remove it to avoid extra premiums.

• Policy Includes New Car Replacement Coverage: In case your policy includes this feature, your insurer will replace your totaled or stolen car with the same year, make, and model. Thus, in this situation, gap insurance is quite unnecessary to policyholders.

• Agreed Value Option in Policy: This option ensures you're paid a predetermined value for your car, regardless of depreciation, reducing the need for gap coverage. In fact, this policy also covers the repair costs even if they exceed the car's actual cash value, or pays the agreed amount in full.

Even if you don’t need gap insurance, liability coverage is legally required, so skipping this protection isn't an option. This is why A-MAX Insurance helps you secure the right auto insurance coverage at an affordable price. 

Whether you want full coverage to get comprehensive protection or a commercial auto insurance to use your car for business, with our personalized guidance, you can get the right coverage to drive with confidence.