You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the technical advice and tools needed to succeed throughout life ’ s fiscal journey. Bankrate ’ s editorial team writes on behalf of YOU – the subscriber. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow rigid guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no target recompense from advertisers, and our content is thoroughly fact-checked to ensure accuracy. so, whether you ’ re reading an article or a review, you can trust that you ’ re getting credible and dependable data. We value your entrust. Our mission is to provide readers with accurate and indifferent information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check column content to ensure the data you ’ re read is accurate. We maintain a firewall between our advertisers and our column team. Our column team does not receive direct compensation from our advertisers. Bankrate follows a rigorous editorial policy, so you can trust that we ’ rhenium putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right fiscal decisions. All providers discussed on our web site are vetted based on the value they provide. And we constantly review our criteria to ensure we ’ ra putting accuracy first. Our policy team is composed of agents, data analysts, and customers like you. They focus on the points consumers care about most — price, customer service, policy features and savings opportunities — so you can feel convinced about which provider is correct for you. Bankrate follows a rigid editorial policy, so you can trust that we ’ rhenium putting your interests first. All of our contentedness is authored by highly restricted professionals and reviewed by subject matter experts, who ensure everything we publish is objective, accurate and worthy of your reliance. Founded in 1976, Bankrate has a long cut commemorate of helping people make smart fiscal choices. We ’ ve maintained this reputation for over four decades by demystifying the fiscal decision-making process and giving people assurance in which actions to take future. While we adhere to strict column integrity, this post may contain references to products from our partners. here ‘s an explanation for how we make money. This content is powered by HomeInsurance.com ( NPN : 8781838 ). For more information, please see our Insurance disclosure. Purchasing a stigmatize newly car is an expense that not everyone can pay for out of pocket ; it much requires finance. If the vehicle is totaled or stolen, you inactive have to pay the outstanding lend amount, besides buying or renting another car to compensate for the passing. Your standard car indemnity will help pay for the expense of buying a new vehicle if your policy includes new car surrogate coverage. If your vehicle is totaled beyond repair and the depreciate value is less than what you however owe on the lend, col indemnity picks up where your title payout might not cover the remainder. Guaranteed Asset Protection ( GAP ) is an optional endorsement that pays the remainder between the loan sum and depreciated value of the vehicle .
What is gap insurance?
Gap indemnity is optional car indemnity coverage that covers the “ gap ” between the amount owed on a vehicle and its actual cash value ( ACV ) in the event it is totaled, destroyed or stolen from a cover claim. If you are planning on rent or buying a car or have already done therefore, you may be wondering if you should buy gap insurance, or possibly where to buy col indemnity. Gap insurance is typically an optional coverage for drivers. In some states, however, an car franchise is required to offer break indemnity at the point of purchase. Say you have been involved in an accident and your fomite has been damaged beyond compensate and must be replaced. You still owe $ 18,000 on your car lend but the vehicle is now worth lone $ 15,000. Gap indemnity would cover the $ 3,000 remainder between what you owe on your car and its current market prize, after accounting for deductibles. Some policies besides cover the deductible. Remember that gap indemnity typically applies only to vehicles that are stigmatize new, or models less than a year old, that have been totaled or stolen. It does not cover accidents, damages, repairs or a sale or tradeoff, even if the finance come is higher than the measure of the fomite. It will besides not help buy you another vehicle — you would need modern car replacement coverage to cover the expenses of a new fomite.
Read more: Guide to Car Insurance
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How much is gap insurance?
You can get gap insurance from a few places — primarily the franchise or lender that is financing your car, or directly from an car insurance provider. Gap coverage is typically more expensive if you get it from the franchise or lender versus adding it to your car insurance policy. That said, a few factors may impact your gap policy cost. Your insurance company will probable consider respective factors, including your vehicle ’ s actual cash value ( ACV ), geographic localization, age and car policy claims history. Ask your car insurance company if it offers gap indemnity and how much it would cost based on your situation to understand if col insurance is the right fiscal protective covering for you .
Where to buy gap insurance
Some car insurers, like Geico, do not offer col indemnity, while others vary in how this protective covering is offered and how it works. here ’ s a immediate expression at a few options :
- State Farm: The largest auto insurer in the U.S., State Farm does not offer gap insurance but has a feature called Payoff Protector, which anyone getting a car loan from a State Farm bank (an alliance with US Bank) is eligible for. Payoff Protector only applies for full coverage car insurance, but this policy does not necessarily have to be underwritten by State Farm. Even if your auto insurance policy is written by a different insurance carrier, if your loan is from State Farm, you are eligible for Payoff Protector at no extra cost.
- Allstate: The Allstate gap program waives the difference between a primary auto insurance settlement and the outstanding balance owed on a vehicle. It waives covered losses up to $50,000 and reimburses a deductible payment. The deductible is the amount of the claim you are responsible for and is subtracted from your insurance payout at the time of a loss.
- Progressive: Progressive caps coverage at 25% of the vehicle’s actual cash value. You can receive gap insurance coverage bundled into your existing policy with the company for as little as $5 per month.
- Nationwide: Nationwide offers gap insurance but does not waive your deductible if you file a claim, so be mindful of whether your deductible is low enough that you can afford it in case of a total loss.
- AAA: AAA provides gap coverage for vehicles that are fully covered, including optional comprehensive and collision insurance. The insurer will waive up to $1,000 of your deductible if your car is declared a total loss.
- Esurance: Esurance (and some other auto insurers) refers to gap insurance as auto loan and lease coverage. You may qualify for coverage if you are leasing or paying off a financed vehicle and have full-coverage insurance.
- USAA: USAA auto insurance is available to active and former military and their family members. USAA offers Total Loss Protection for vehicles less than seven years old that have a car loan of more than $5,000. It reimburses up to $1,000 of a deductible.
Is gap insurance worth it?
Gap policy is recommended by lenders or car insurance companies for new vehicles when or if :
- The auto loan has a length of five years or longer
- Loan has a high-interest rate because the principal on the vehicle will take longer to pay down versus the depreciation
- You paid a low down payment, typically less than 20%
It is broadly recommended to compare what you will pay for your cable car over the life of your financing to the car ’ randomness MSRP or agreed-upon sales monetary value and see if you have a opening from the startle. In the consequence you do, gap indemnity may be a well estimate. Keep in judgment your “ col price ” is always fluctuating. by and large, the remainder between what you owe and what the fomite ’ s worth shrinks as you make monthly payments and as the car depreciates. Other situations in which gap insurance might not be necessary include:
- When there was a large down payment
- If the initial loan term was short, say three years or less.
You have the choice to cancel the coverage at any time — typically recommended only once the amount owed on the vehicle is less than its grocery store value. If you are diffident of whether opening insurance is worth it, consider the cost to risk. Gap insurance is fairly cheap and in many cases can be added to your existing full-coverage policy for a nominal monetary value per year. That may be far less than the difference between your car ’ randomness value and what you owe in shell of a major accident .
Gap insurance for leased cars
Like any car or SUV, leased vehicles depreciate cursorily. consequently, if you did not put a lot money down and you still owe a goodly come on your total rent payment, you will likely owe more than the vehicle is worth if you get into an accident. In this position, break indemnity coverage for your lease might be a chic fiscal decisiveness. As with a buy cable car, it may help you to compare your full cost — including taxes and anything else you rolled into the lease — to the vehicle ’ s MSRP to determine if you have a gap. And barely like a buy vehicle, the remainder between what you owe and what the car ’ s worth decreases as you make monthly payments and as the car depreciates. This means you may not need the coverage for your entire lease time period. You may only need it for a few months, depending on your rent agreement .
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Frequently asked questions
How do I get the best deal on gap insurance?
You have a few options for where to buy gap indemnity : through the franchise, a standard car insurance company or a peculiarity gap indemnity party. A gap insurance policy through dealerships can be excessively expensive to make sense for some drivers, although it can be a convenient option. Shop around between the franchise, car insurers and companies that specialize in col indemnity ; your best deal may come from your existing car policy carrier. If you already have broad coverage, you may be able to add break indemnity for a marginal annual cost .
Do you get money back from gap insurance?
If you pay a vehicle lend off in full early, you may be entitled to a refund of the unused assign of your opening insurance. Some states require insurers to refund the premiums if, for exercise, a 36-month lend with gap coverage for 36 months is paid in 24 months. In some cases, an insurance company may not let you know if you are due a refund. Make certain to keep your bribe letter, the original contract or insurance information and an odometer disclosure statement. It is crucial to know an insurance company ’ mho refund policy before buying gap policy. It could be helpful to contact your express commerce department or policy commissioner ’ s position to learn about your state of matter ’ south regulations beforehand, or what to do if your insurance company refuses to issue a refund.
How does gap insurance work if your car is totaled?
Gap indemnity merely provides fiscal protection for the gap between the actual cash value of a vehicle at the meter of a total loss title and the current sum inactive owed on an car loan. sum loss can vary by state law and/or by the insurance provider .
Do I need gap insurance if I have full coverage?
While you might feel like your car indemnity coverage is full-bodied, car insurers typically do not offer any one policy called “ full coverage ” that is designed to protect you against every possibility. alternatively, you can get more protection by layering unlike types of coverage ( for example, liability, collision, comprehensive ) together. Adding gap insurance to existing coverage can be an excellent way for some drivers to have greater peace of mind. however, coverage needs and benefits will vary widely by driver .