Do I Need Gap Insurance On A Used Car?

What is Gap Insurance?

Gap insurance is an important type of auto insurance coverage for any vehicle owner to consider. Gap insurance is an optional coverage that can help you bridge the gap between what you owe on your car loan and the actual cash value of your car if it is totaled or stolen. If you are considering gap insurance for your used car, there are some things you should know.

When to Get Gap Insurance

If you’re buying a used car that’s a few years old, you may find that the car’s actual cash value (ACV) is lower than what you owe on your car loan. In this case, you will need to purchase gap insurance to cover the difference. This is especially important if you are financing the purchase of a used car. In this situation, you may have a loan that is greater than the actual cash value of the car, and gap insurance is the only way to cover the difference.

What Does Gap Insurance Cover?

Gap insurance typically covers the difference between the actual cash value of your car and the amount you owe on your car loan. It is important to note that gap insurance does not cover repairs to the vehicle, or any other costs related to the car, such as towing or rental car fees. It is strictly meant to cover the difference between the ACV and the loan amount.

How Much Does Gap Insurance Cost?

The cost of gap insurance is typically based on the loan amount and the length of the loan. Generally, the cost of gap insurance is somewhere between 3% and 7% of the loan amount. For example, if you have a loan for $20,000, you may pay between $600 and $1,400 for gap insurance. The exact cost will vary depending on the terms of your loan, so it’s important to talk to your insurance company to get an accurate estimate.

Where to Get Gap Insurance

Gap insurance is typically offered through your car insurance company. It is important to make sure that you are getting the coverage you need at a price you can afford. Many insurance companies offer discounts for multiple policies, so it may be worth it to shop around for the best deal. Be sure to ask about any discounts or special offers that may be available to you.

Final Thoughts

Gap insurance is an important type of coverage to consider if you are buying a used car. It can help you bridge the gap between what you owe on the car loan and the actual cash value of the car if it is totaled or stolen. The cost of gap insurance is typically based on the loan amount and the length of the loan, and it is important to shop around for the best deal. Ultimately, gap insurance can provide peace of mind in the event of an accident or theft.