Average Cost For Gap Insurance
What Is Gap Insurance and What Are the Average Cost?
Gap insurance, sometimes known as loan/lease payoff coverage, is an optional form of insurance that helps cover the difference between what you owe on your car loan and the current market value of your car in the event that it is totaled or stolen. Gap insurance is a wise investment if you have financed a car, as it can save you from having to make up the difference between what your insurer pays out and what is still owed on the loan.
What Does Gap Insurance Cover?
Gap insurance covers the difference between what you owe on your car loan and the current market value of your car. In the event that your car is totaled or stolen, your gap insurance policy will cover the difference between what your insurer pays out and what is still owed on the loan. This can be a lifesaver if you’re upside-down on your loan, which means you owe more than the car is worth. Without gap insurance, you’d be on the hook for the difference.
Do I Need Gap Insurance?
Whether or not you need gap insurance will depend on a few factors. If you’re financing a new car and you’ve made a large down payment, you likely don’t need gap insurance. However, if you’ve put little or no money down and you have an extended loan term, gap insurance could be a sound investment. It could also be beneficial if you’re leasing a car, as you’re almost always upside-down on the loan.
How Much Does Gap Insurance Cost?
The cost of gap insurance varies from provider to provider and from state to state. Generally speaking, you can expect to pay between 5% and 7% of your vehicle’s value for gap insurance. For example, if you’re financing a car that’s worth $30,000, you can expect to pay anywhere from $1,500 to $2,100 for gap insurance. Remember, though, that this is just a ballpark estimate. Your actual cost may vary.
Where Can I Buy Gap Insurance?
Gap insurance is typically sold through your auto insurance provider, although some car dealerships may offer it as well. Be sure to shop around and compare rates before you purchase, though, as the cost of gap insurance can vary widely from provider to provider. Also, keep in mind that you may be able to bundle gap insurance with other auto insurance policies, such as comprehensive and collision coverage, to get a discounted rate.
Conclusion
Gap insurance is a wise investment if you’re financing a car, as it can help cover the difference between what you owe on your loan and the car’s current market value in the event that it is totaled or stolen. The cost of gap insurance varies from provider to provider and from state to state, but you can generally expect to pay between 5% and 7% of your car's value. Gap insurance is typically sold through your auto insurance provider, although some car dealerships may offer it as well. Be sure to shop around and compare rates before you purchase, however, as the cost can vary widely.
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