You don’t need to purchase gap insurance from the dealership, no matter what the salesperson at the finance office says. Depending on your terms, down payment and vehicle’s depreciation, full coverage may not be the best option.
Insurify will help you find the right gap insurance option for you at a cost you can afford.
What is Gap Insurance?
Gap stands for Guaranteed Asset Protection (GAP). Gap insurance covers you in the event that your car is stolen or totaled. It pays the difference between your loan amount and the car’s actual cash worth (ACV). It fills the gap between the amount you owe to the bank and the collision insurance coverage.
What is Gap Insurance?
Imagine that you just bought a new car for $25,000 and now you owe $20,000. The actual cash value of your vehicle may be as high as $15,000. The insurance company pays your $500 deductible and you get a $14,000.500 payout. This money goes towards paying down your car loan. Your gap insurance will cover the $5,500 balance you owe on your car.
Gap insurance can be purchased as an optional add-on or additional coverage. However, lenders may require it if the vehicle is leased. Gap insurance companies rarely cover your deductible. The coverage is available regardless of who was at fault for an accident.
You can get gap insurance coverage:
- Negative equity (or being upside-down) is the difference between the car’s value and the amount you owe the bank
The following are not covered by gap insurance:
- Bodily injury
- Damage to a non-totaled vehicle–comprehensive coverage and collision coverage on your auto policy cover this
- Engine failure
What is the average length of gap insurance? You can cancel your gap insurance at any time. It can be removed if you owe less that the vehicle’s value.
Do I need gap insurance?
Your new car takes a 10% depreciation hit when you drive it off the lot. After two years, the car’s value drops by almost a third according to Carfax. You could be exposed to a significant risk if you don’t have gap insurance. If you already have gap insurance, it is worth looking into getting coverage.
- Lender who needs it
- Leasing a vehicle
- A car loan term of at least 60 months
- You can pay less than 20% down, or none at all
- A high-interest rate loan
- Negative equity is rolled over from the last auto loan
- Luxury or high-value vehicles, as they are more likely to depreciate quicker than the average vehicle.
To see if your policy can be dropped, check Edmunds.com or Kelley Blue Book. Do you want to find a lower rate? Take a look at Insure.
What is the cost of Gap Insurance?
Is gap insurance worth the cost? If you owe more than the car is worth, it can be an easy decision. You don’t need to spend a lot of money.
On top of standard car insurance, you can expect to pay about $5 per month or $60 per year. Fox Business estimates that the dealership could charge between $500 and $700 per year. Stand-alone policies can also be purchased from third-party businesses, priced between $200 and $300.
Dealerships and stand-alone businesses require you to pay upfront. The dealership may also roll gap insurance into your loan, which will increase the interest rate. Gap and car insurance can be purchased from the same company, which is often the cheapest option.
It’s still possible to save money if you sign up at the dealership. It is possible to cancel your policy and receive a refund of any premium unused. You can cancel the policy by simply getting a new one.
How to Choose a Gap Insurance Company
Ask these questions when choosing a company:
- Is the deductible covered by the auto insurance? The deductibles for most cases are between $500 and $1,000. That’s quite a bit of money to save. Rarely will you find an Allstate company that covers your deductible, but many don’t.
- Are they reputable? It’s smart to verify the BBB ratings and read online reviews before you make a decision about an independent company.
- Can you cancel later? It’s not necessary until you owe less on the car than it’s worth. Before you sign up, ask questions about cancellation policies and refunds.
- What is the cost?
Top 7 Gap Insurance Companies in 2021
These are the top seven gap insurance companies ranked according to the Insurance Information Institute’s total car insurance policies. J. D. Power has given them similar high customer satisfaction ratings. Gap coverage is an endorsement for your regular car insurance and you can cancel at anytime.
Are you a customer of GEICO, Farmers or another company that does not offer gap insurance? Insurify allows you to quickly compare insurance prices.
The top seven are highlighted with honorable mentions.
Progressive refers to it as “loan/lease paymentoff,” but it’s actually gap insurance. It can cover up to 25% of the car’s actual cash value.
Allstate and Esurance
Esurance is part of Allstate, so they are listed together. Both cover new and used vehicles valued at up to $100,000. Your gap insurance will pay any amount owed less than $50,000. These are the only two options that will cover your deductible up until $1,000.
Liberty Mutual requires that you purchase gap insurance simultaneously with the car. You must also be the first owner of the car. This means that used cars will not be eligible. You won’t find gap insurance in every state. However, you will know when you get your quote.
All over the country
Nationwide’s gap policy will “be on your side” in the event of total loss or theft. Nationwide will pay the gap, although you still need to pay the deductible.
American Family Insurance
American Family calls gap insurance “loan assistance coverage” or “lease/loan insurance.” Am Fam’s limits for gap insurance pay 25 percent of the vehicle’s actual cash value.
It is also known as “loan/lease-gap insurance” by Travelers. You have to be the original owner of the vehicle and must purchase the vehicle from a new dealer in order to be eligible.
Honorable Mentions: State Farm, USAA
State Farm does not offer gap insurance. However, they do have a feature called Payoff Protector (at no additional cost). This applies to loans from any of their banks. If you have full coverage insurance, it functions exactly like gap insurance. You don’t need to have full coverage with State Farm in order to qualify.
USAA does not offer gap insurance through its insurer. However, USAA offers gap insurance through its bank.
FAQ for Gap Insurance Companies
What insurance companies offer gap insurance
These are the top seven car insurance companies, ranked according to the number of policies.
Can I purchase gap insurance myself?
You don’t need to purchase gap insurance at the dealer. The cost of a dealership can be three times higher than the price of a gap insurance policy purchased through your auto insurer. Third-party insurers also offer standalone gap policies. For the best price and convenience, we recommend that you purchase your gap insurance and your auto insurance from the same company.
Where can I find free online car insurance quotes?
Gap insurance is a great way to get the best price. Why not do the same with your car insurance? A website that compares auto insurance quotes in your area should be visited. Find a car insurance comparison tool like Insurify to compare up to 10+ real quotes for your combined driver profile and unlock savings and car insurance discounts. While rates will vary depending on your driving record and personal profile, you should still be able find a fair price. Insurify offers the fastest car insurance quotes from local businesses in just minutes.
Conclusion: How to get car insurance that is affordable and the best.
Gap insurance is the best way to cover your gap. You can also protect the difference between what the car is worth and what you owe to the lender by getting car insurance.