Gap Insurance On A Used Car: Everything You Need To Know

What Is Gap Insurance?

Gap insurance, or Guaranteed Auto Protection, is a type of insurance coverage that is designed to protect you in the event of a total loss on a vehicle. The coverage pays the difference between the actual cash value of the vehicle and the amount you still owe on the loan. It comes in especially handy if you have a loan on a used car and the amount you owe exceeds the car’s current market value. Gap insurance is also known as loan-lease gap coverage, and is usually only available if you finance a car through a dealership.

Do I Need Gap Insurance On A Used Car?

If you are financing a used car, gap insurance is a wise investment. If you are leasing a car, your lender may require you to carry gap insurance. If you purchase a used car with cash, you do not need gap insurance. However, if you finance the car, you may want to consider gap insurance. The reason is that if you are in an accident and the car is totaled, the insurance company may only pay you the actual cash value of the car. If you owe more on the loan than the car is worth, you will still owe money to the lender. Gap insurance bridges the gap between what the vehicle is worth and what you owe.

How Much Does Gap Insurance Cost?

The cost of gap insurance can vary depending on the type of vehicle you are insuring and the coverage you are seeking. Generally speaking, gap insurance can cost anywhere from a few hundred to a few thousand dollars. The cost is usually included in your monthly payments, and the average coverage is usually around $1,000. It is important to note that gap insurance does not cover your deductible, so you still need to pay that out of pocket.

What Does Gap Insurance Cover?

Gap insurance covers the difference between what you owe on your loan and the actual cash value of the vehicle, in the event of a total loss. It also covers the difference between what you owe on the loan and the amount of money that is paid by the insurance company for the total loss. Gap insurance can also provide coverage for items such as taxes and fees, as well as any negative equity that may exist on the loan. Gap insurance can also cover any payments that may be due on the loan.

How Do I Buy Gap Insurance?

Gap insurance can usually be purchased through your lender or auto insurance provider. It is important to note that gap insurance is usually only available if you purchase your vehicle through a dealership. When purchasing gap insurance, it is important to make sure that you understand the terms and conditions of the policy, as well as the coverage limits.

Conclusion

Gap insurance is an important form of coverage for anyone who is financing a used car. If you are in an accident and the car is totaled, gap insurance can cover the difference between what you owe on the loan and the actual cash value of the car. Gap insurance can be purchased through your lender or auto insurance provider, and the cost will vary depending on the type of vehicle you are insuring and the coverage you are seeking. It is important to understand the terms and conditions of the policy, as well as the coverage limits, before purchasing gap insurance.