If you’ve ever been in an accident or had your vehicle stolen, you know the feeling of helplessness that comes with it. When it comes to purchasing a car, there are many options to consider when selecting insurance coverage. One of these options is auto gap insurance, which can be a lifesaver if the worst-case scenario happens.
But what exactly does auto gap insurance cover? In this article, we will explore the ins and outs of auto gap insurance, including what it covers, who should consider getting it, and tips for finding the best deal. We’ll also discuss how this type of coverage helps protect you in the case of an accident or theft. Keep reading to learn more about auto gap insurance and how you can benefit from it.
How does auto gap insurance work?
Auto gap insurance is a type of insurance that helps to pay off your loan or lease if your vehicle is totaled in an accident. If you have a loan or lease on your vehicle, your lender will require you to have this type of insurance. This coverage closes the “gap” between what you owe on your vehicle and the actual cash value (ACV) of your vehicle.
The ACV is what your vehicle is worth after depreciation. So, if you owe $20,000 on your car loan but the ACV of your car is only $18,000, there is a $2,000 “gap.” Auto gap insurance would cover that $2,000 difference.
What does auto gap insurance cover?
If you’re financing a vehicle, your lender will likely require you to have auto gap insurance. But what exactly does this type of coverage do?
Auto gap insurance covers the difference between what you owe on your vehicle and its actual cash value in the event that it’s totaled or stolen. This can be a lifesaver if you have an accident or your car is stolen and the amount you owe is more than the car is worth.
Without auto gap insurance, you would be responsible for paying off the entire loan balance even if the car is no longer in your possession. With this type of coverage, the insurer will pay the difference between your loan balance and the car’s actual cash value, up to the limit of your policy.
Auto gap insurance is relatively inexpensive, and it could save you thousands of dollars if your car is totaled or stolen. If you’re financing a vehicle, be sure to ask your lender about this type of coverage and consider adding it to your policy.
How much does auto gap insurance cost?
Auto gap insurance is an insurance policy that pays the difference between what you owe on your vehicle and the amount your vehicle is worth if it’s totaled in an accident. It typically costs about $20 to $50 per year and is often included in new car loans.
Do I need auto gap insurance?
If your vehicle is totaled in an accident or stolen, gap insurance covers the difference between what you owe on your car loan and the amount your car is worth.
If you have a loan or lease on your vehicle, you may want to purchase gap insurance. This type of coverage is not required by law, but lenders often require it as part of a finance agreement. If you’re making monthly payments on your vehicle, chances are you’ll need gap insurance.
Gap insurance comes into play if your vehicle is totaled or stolen and you owe more than its actual cash value (ACV). Let’s say you’re financing a new car for $25,000. After three years of driving, it’s worth $15,000 but you still owe $20,000 on the loan. If your car is totaled in an accident, gap insurance will cover the $5,000 difference so you don’t have to pay it out-of-pocket.
Gap insurance typically costs a few hundred dollars and is sold by auto insurers. If you finance your vehicle through a dealership, they may offer gap insurance at the time of purchase.
How to get auto gap insurance
Auto gap insurance is vital for ensuring that you are fully protected in the event of an accident. Here are a few tips on how to get auto gap insurance:
– Shop around and compare rates from different insurers.
– Make sure to read the fine print and understand the coverage options before purchasing a policy.
– Choose a policy with a reputable insurer that offers good customer service.
Conclusion
Auto Gap insurance is an important protection for those who are purchasing a new or used vehicle. By providing coverage in the event of an accident that totals your car, it can help keep you from having to pay large repair bills out-of-pocket. It’s important to make sure you understand what auto gap insurance covers and how it works so that you can make an informed decision when considering buying a policy. We hope this article has given you all the information you need to decide if auto gap insurance is right for you.