Gap Auto Insurance Coverage - What Does Gap Insurance Cover?

What Is Gap Auto Coverage?
GAP auto insurance coverage is one the most necessary, yet least understood insurance products
available to vehicle owners.

It's purpose is simple: If your car is totaled, gap auto insurance will cover the difference (or  gap)
between what your insurance company says your car is worth (actual cash value) and what you
still owe on your loan or lease. It is also available for motorcycles, RV's, campers and trailers.

What Does Gap Insurance Cover?
Typically, losses due to the following events are covered: Fire, Theft, Vandalism, Accident, Flood,
Tornado, and Hurricane - including your policy's deductible.

Since most new cars depreciate by as much as 20% the first year of ownership, and an additional
15% the following year (Edmunds.com) it's likely that during this period the balance of your car
loan will exceed the depreciated value of your vehicle.  This financial shortfall, plus the amount of
your deductible, could easily add up to thousands of dollars in the event of a total loss.

You should consider adding GAP insurance coverage to your policy if:
1. You purchase a new or used car with little or no money down.
The more you borrow, the longer it takes before the loan balance and the actual cash value of
your vehicle are roughly equal. This usually takes 3 - 4 years depending on the length of the loan
and the interest rate.

2. You choose a 5 year or longer extended term loan.
An extended payback period dramatically increases the payoff amount during the first few years of
the loan. This leaves you especially vulnerable to a situation where you could end up owing far
more than your car is worth if it is totaled.

3. A low credit score forces you into a high interest loan.
Buyers with a credit score below 550 are currently being charge 13% for new car loans and 18% for
used cars. If this is the case you definitely need Gap insurance coverage. But don't pay a new or
car dealer $700 for a non-refundable policy - not when you can purchase the same coverage for
around $30 a year either from your current insurance company, or another nationally reognized
insurer if your company doesn't offer gap insurance.

What Gap Insurance Does Not Cover
The following gap insurance exclusions are fairly standard from policy to policy. Please check with
your insurer to for exact coverage and exclusions.

Cars that are not covered by both comprehensive and collision insurance.

The outstanding balance from a previous car loan or lease is rolled over into the new car loan.

After-market equipment that was not factory installed such as GPS or sound systems.

Financial penalties and/or security deposits on leased vehicles.

Unpaid or overdue lease or loan payments.

The cost of dealer add on products such as extended warranties.

GAP auto insurance coverage is a powerful and inexpensive tool for leveling the financial playing
field between consumers and lending institutions. Spending a few minutes of your time now to
get a fast quote online could save you thousands down the road.
Gap Insurance Coverage
Gap Insurance Quotes
Gap Faq's
Gap Buyer's Guide
gap insurance providers
Your car loan payoff
Your vehicle's actual cash value
The First Gap
$  4,000
Your deductible
$     500
The Second Gap
$      500
Insurance settlement less deductible
The Total Gap (what you would owe)
$   4,500