Buying a new car is exciting, but it can also be a significant financial investment. However, once you drive your new vehicle off the car lot, it starts to lose value immediately. In fact, most cars lose about 20 percent of their value within a year. This means that if you get into an accident, your standard auto insurance policy may not cover the full cost of your vehicle, leaving you to pay out of pocket.
That’s where gap insurance comes in. Gap insurance covers the difference between what your standard auto insurance policy will pay and the amount you owe on your car loan. This is especially important if you put down only a small deposit when you financed the purchase of your new car.
In the early years of your vehicle’s ownership, the amount of your loan may exceed the market value of the car itself. If you get into an accident during this time and your car is badly damaged or totaled, your standard insurance policy will only pay the current market value of the vehicle. This means that you may still owe money on your car loan even after your insurance has been paid out.
Gap insurance can help bridge that gap by covering the difference between what your standard policy pays and what you owe on your loan. This means that you won’t be stuck with a large bill for a car that you no longer have.
It’s important to note that gap insurance is not always necessary. If you put down a large deposit or have paid off a significant portion of your car loan, the market value of your vehicle may not be significantly less than what you owe. In this case, gap insurance may not be worth the additional cost.
However, for many car owners, gap insurance can provide peace of mind and financial protection in the event of an accident. It’s important to shop around for the best gap insurance policy and compare prices and coverage options before making a decision. Many car dealerships offer gap insurance, but it’s often more expensive than purchasing a policy from an insurance company.
In conclusion, gap insurance can be a valuable addition to your car insurance policy, especially if you put down a small deposit or have a long-term car loan. It can help protect you financially in the event of an accident and ensure that you don’t end up owing money on a car that you no longer have. However, it’s important to carefully consider whether gap insurance is necessary for your situation and shop around for the best policy before making a decision.
2021 Best GAP Insurance Companies
Gap insurance is essential for drivers who want to protect themselves from potential financial losses. Whether you’re leasing or financing a car, gap insurance can help cover the difference between what you owe on the vehicle and its actual cash value. However, with so many gap insurance providers available, it can be challenging to choose the best option for your needs. In this article, we’ll take a closer look at some of the best gap insurance companies available.
One of the top providers of gap insurance is Travelers Insurance. Travelers offer affordable premiums, and the company has received fewer customer complaints than average. For approximately 5% of the car’s comprehensive and collision premium, customers can add loan/lease gap coverage to their policy. However, it’s worth noting that only vehicles bought directly from a new car dealer are eligible.
The Hartford is another top gap insurance provider. The Hartford’s gap insurance must be added to your coverage within the first 30 days after purchasing or leasing the vehicle.
Liberty Mutual is a reputable provider of gap insurance, although it can be more expensive than some competitors, costing an average of $5-$15 per month. However, Liberty Mutual gap insurance is an excellent choice for drivers who already have their car policy with the company. Since gap insurance is typically only a minor portion of your premium, it’s more cost-effective to focus on the price of your entire policy.
Progressive is the third-largest car insurance company in the United States and offers gap insurance, sometimes advertised as “loan/lease payoff insurance.” Drivers can easily add gap insurance to their collision and comprehensive coverage. Progressive’s gap insurance is limited to 125% of your vehicle’s actual cash value and may or may not cover your deductible, depending on your claim. Overall, Progressive’s gap insurance helps minimize the difference between the actual cash value of your car and the amount owed on that vehicle.
Allstate offers gap insurance in most states, also known as guaranteed asset protection insurance. Allstate’s gap insurance is available for vehicles worth up to $100,000, with covered losses limited to $50,000. This is a higher amount than many of Allstate’s competitors. Allstate’s gap insurance covers deductibles up to $1,000, which can reduce your out-of-pocket expenses in the event of a total loss. You can buy Allstate’s guaranteed asset protection insurance from dealers nationwide.
American Family offers gap insurance to customers in 19 states. To qualify for American Family gap insurance, you first need to have an auto insurance policy with American Family. That policy needs to have collision and comprehensive coverage. You can purchase American Family gap insurance through independent agents.
Amica is one of America’s best car insurance companies and offers gap insurance. Amica’s gap insurance works like the gap insurance offered by other companies here, covering the difference between the value of your vehicle and the amount you owe on that vehicle. Amica has strong customer service, claims satisfaction, and financial stability ratings and an extensive range of discounts and ways to save on your policy.
Finally, Nationwide is another major insurance provider that offers gap insurance as an optional add-on available on certain vehicles. Nationwide’s gap insurance can cover deductibles, theft, total loss, and negative equity. Like other gap insurance policies listed here, Nationwide’s gap insurance adds more protection to your car insurance.
In conclusion, gap insurance is essential coverage for drivers who want to protect themselves from potential financial losses. Choosing the best gap insurance provider can be challenging, but by considering factors like cost, eligibility, and coverage options, you can find the provider that best suits your needs.
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Gap insurance covers the excess amount from your auto loan in the case that the insurance company does not cover the entire loan. Depending on the insurance company’s policies, it may or may not cover the deductible as well. This coverage is marketed for those who are on low down payments, have high-interest rates on loans they have taken, and those with around 60-month or longer terms. Gap insurance is typically offered by finance companies when a customer purchases a vehicle, but many auto insurance companies also offer this coverage to consumers.