What is the Average Cost of Gap Insurance?

Gap insurance, also known as Guaranteed Asset Protection insurance, is a type of auto insurance coverage that protects car owners in the event that their vehicle's value drops below the amount they still owe on the loan or lease. This type of insurance is typically an optional coverage, but it is often recommended for people who have recently purchased a new or used car and are financing it.

When you purchase gap insurance, you are essentially paying for protection for the difference between what you owe on your car loan or lease and what the car is actually worth at the time of a total loss. If you have a total loss, such as a car accident or theft, gap insurance will cover the difference between the amount that you owe on the car and the amount that your insurance company will pay out.

How Much Does Gap Insurance Cost?

The average cost of gap insurance varies depending on several factors, including the type of vehicle, the amount of coverage purchased, and the insurer. Generally, gap insurance can cost anywhere from $500 to $1,000 for a five-year policy. However, some insurers may offer a discounted rate for shorter-term policies.

In addition to the cost of the policy, it is important to consider the amount of coverage that you purchase. Gap insurance typically covers the difference between the value of the vehicle at the time of the total loss and the amount that you owe on the loan or lease. The amount of coverage you purchase will depend on the value of your car, the amount of the loan or lease balance, and other factors. Be sure to discuss your options with your insurance agent to ensure that you purchase the right amount of coverage.

When Is Gap Insurance Necessary?

If you have recently purchased a new or used vehicle and are financing it, gap insurance is often recommended. This is especially true for people who have taken out a loan with a large down payment or who have financed a vehicle for more than its actual value. Gap insurance can help protect you in the event of a total loss and prevent you from having to pay out-of-pocket to make up the difference.

It is also important to consider the type of vehicle that you are purchasing. Some vehicles, such as luxury cars, depreciate faster than others. If you purchase a vehicle that is likely to depreciate quickly, gap insurance may be a worthwhile investment. Be sure to discuss your options with your insurance agent to ensure that you make the right decision.

Conclusion

Gap insurance is an important form of auto insurance coverage that can help protect you in the event of a total loss. The average cost of gap insurance varies depending on several factors, including the type of vehicle, the amount of coverage purchased, and the insurer. Be sure to discuss your options with your insurance agent to ensure that you purchase the right amount of coverage.