What Is Gap Car Insurance?
Explanation And Benefits Of What Is GAP Car Insurance?
GAP insurance is a type of additional coverage you can purchase for your vehicle. It’s designed to cover the difference between the current value of your vehicle and the amount you owe on your car loan or lease.
Wondering why this difference in value matters? Essentially, all vehicles become used cars the moment you drive them off the lot, even if they only have a few miles on the odometer. No matter its condition or its price, every vehicle starts to lose value immediately upon purchase.
Who Needs GAP Car Insurance?
As helpful as GAP insurance can be, not everyone needs to buy it. If you paid for your vehicle in full and you own it outright, then you don’t have to worry about depreciation or the current value of your car or truck. Since there’s no gap to cover, additional insurance doesn’t offer extra value. In fact, GAP insurance won’t provide any additional coverage for drivers who own their vehicles, even if your car is totaled or stolen.
If you’re financing or leasing your vehicle and it’s stolen or totaled, depreciation can pose potential issues. In fact, GAP insurance may be mandatory if you don’t own your vehicle yet. Many dealerships and financial institutions require you to carry GAP insurance if you finance a vehicle. That’s because this additional protection goes both ways, ensuring that you can pay off your loan or lease and helping you avoid financial difficulties after a theft or accident.
How Much Does GAP Car Insurance Cost?
Like personal auto insurance, GAP coverage usually requires a monthly premium. The cost of your GAP insurance premium typically depends on several factors:
- The make, model, and year of your vehicle.
- The depreciation model for your vehicle.
- The balance on your auto loan.