Gap insurance, also called “loan/lease gap coverage,”. It is an optional car insurance coverage that helps yur auto loan pay off if your car is totaled or stolen. Not everyone needs gap insurance, but there are some cases when it can be beneficial.
How Does GAP Insurance Work?
Even if you are in an accident, your basic policy will probably cover part or all of the damage because conventional auto insurance plans cover the whole depreciated worth of a vehicle.
On the other hand, if you finance the purchase of a new car and only make a little down payment, the loan balance can eventually be greater than the car’s market worth.
Gap insurance can assist in paying the difference between what your regular insurance will pay and what the vehicle is now worth, in the event that you are in an accident and severely damage or wreck your car, or if your car is stolen.
is gap insurance worth it?
Gap insurance is not necessary unless you own a loan or lease a car. Also, if your loan balance is less than the worth of your vehicle, you are not in need of it.
However, if you do have a loan or lease, you might want to consider if you can afford to make the payment difference between the remaining balance and the car’s worth. You’d undoubtedly benefit from having gap coverage if you couldn’t make that payment or didn’t want to cope with that financial hardship in an emergency.
When does gap insurance not pay
Gap insurance is meant to shield you in the event that your loan balance exceeds the value of your vehicle. In that instance, the amount your insurance provider pays out is insufficient to settle the balance owed on your loan or lease.
Which insurance providers offer coverage for gaps?
The following are some of the biggest insurers who provide stand-alone gap insurance (or a similar) as an add-on to auto insurance policies:
- American Family
- Auto-Owners
- Liberty Mutual
- Nationwide
- Travelers
- USAA
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