Gap insurance covers the difference between a vehicle's market value and the amount owed on it if the car is totaled or stolen.
A new car starts losing value the moment it leaves the lot. Within a year, it can depreciate by up to 20%.
Standard auto insurance only pays the current market value of a vehicle, not the amount you still owe on your loan.
If you owe more on your car loan than the vehicle’s market value, gap insurance covers the remaining balance if your car is totaled.
Consider gap insurance if you made a small down payment, financed for over 60 months, or leased the vehicle.
If you purchased a car that depreciates faster than average, gap insurance can protect you from financial loss.
Rolling over negative equity from a previous car loan into a new loan increases the need for gap insurance.
Gap insurance can be obtained from your car dealer or directly from your auto insurance provider.
Adding gap insurance to your auto policy generally costs around $20 more per year, which is often cheaper than dealer offerings.
Gap insurance is usually required for leased vehicles, making it essential for lease agreements to avoid potential financial gaps.