Vehicle GAP Insurance: Get the Best Auto Insurance Protection

It is easy to have a false sense of security that your auto insurance policy covers everything you need. If you total your vehicle, though, how confident are you that your current coverage will help you replace your car? GAP insurance is important in this situation, acting as a buffer or umbrella on top of what your car insurance policy covers. 

GAP, or General Asset Protection insurance, provides coverage for any difference between the worth of your vehicle and what you still owe on a lease or financing agreement. Read on to learn more about what GAP insurance is and if it’s worth it.

How much is GAP insurance typically?

GAP insurance kicks in when you total your vehicle or it’s stolen. In either situation, your primary auto insurance company will determine the actual cash value of the vehicle. For this example, let’s say they determine an actual cash value of $10,000. If you still had a loan balance of $15,000, you would still owe $5,000 to your lender after insurance pays out. GAP insurance would cover that difference.

The cost of GAP insurance will vary from one car insurance company to the next. Factors that will impact the cost of a GAP insurance policy include:

• The location of the vehicle
• The age of the vehicle and mileage
• History of auto insurance claims
• The actual cash value of the vehicle
  

You can buy a standalone GAP insurance policy through a car insurance company, car dealership, or lender, or you can bundle it with your existing auto insurance policy. As a standalone policy, GAP insurance usually costs around $500. When you add GAP insurance as additional coverage to your existing auto insurance policy, you may be able to get it for as low as $5 a month.

Read more: How Much Is GAP Insurance?

Which companies provide GAP insurance?

GAP insurance is quite common among the big players in car insurance. You can find GAP or something similar with companies like State Farm, Allstate, and Progressive. Seek out a GAP insurance quote to start comparing offerings.

So how much is GAP insurance with these companies? Let’s take a look:

• Allstate offers GAP insurance with coverage up to $50,000.
• Progressive will take the actual cash value of your vehicle and provide GAP insurance coverage equal to 25% of that amount.
• State Farm, on the other hand, doesn’t offer GAP insurance but instead sells Payoff Protector coverage, which functions similarly and is only for cars purchased with a State Farm loam.

Several small and large insurance companies offer GAP insurance, so make sure to shop around before deciding on which company will best suit your needs.

How can GAP insurance help you save money on car repairs?

GAP insurance only kicks in when you total your vehicle or it’s stolen. It’s designed to make sure you do not have to continue to pay for a car loan on a car you no longer drive.

For repairs, you need to rely on other types of car insurance, such as comprehensive and collision coverage on a traditional auto insurance policy.

Is GAP insurance worth it on a new car?

When you buy a new car, you’ll likely take out a loan or sign a lease agreement. Once you drive the vehicle off the lot, it’s no longer new, and the value immediately drops by as much as 10%. If you total that vehicle on the way home from the dealership and you had a high loan balance, you may already owe more than the car is worth.

Ultimately, GAP insurance makes a lot of sense when you take out a sizable loan for a new vehicle or lease a vehicle with a minimal down payment. If, on the other hand, you put 50% down in cash on a new vehicle, you’ll have plenty of buffer and won’t need GAP insurance.

Where GAP Insurance Makes Sense 

Do you need GAP insurance? Car GAP insurance makes sense when you are financing a vehicle with little or no money down. A lease agreement may also require you to purchase GAP insurance.

When you purchase a new car, be sure to do the math so you won’t be on the hook for a loan for a car you can’t drive anymore.