HOW MUCH? - gap auto insurance

Gap insurance and why you need it.


You are so excited you just bought your first brand new car. You leave the parking lot of the dealer, you head off onto the open highway and the most horrible thing you could imagine happens - you are hit in the rear end, you lose control of your car and in the blink of an eye, your car is destroyed. Fortunately, you are safe. Unfortunately, your car appears to be totaled.

However, I Have Auto Insurance

You made sure before you arrived at the dealership to take delivery of your new car that you had the proper insurance coverage that is required by law. Nevertheless, did you know that when you drove off the new lot that your car value plummeted upwards of 30%?

Understanding Coverage

Chances are that when you met with your insurance company they recommended both comprehensive insurance coverage and collision insurance coverage. Even if you were to collect the full amount of your collision insurance for the instance related above, you most likely still owe about 30% of the value of your car. That could be as much (or more) than $5,000 if you assume your car cost $25,000!

The Good News

There is good news! Most insurers include a type of coverage called gap insurance in your policy. Gap insurance is specifically designed to cover the difference between the actual market value of your car and the amount that you still owe on it.

What Is Gap Insurance?

Your insurance company is going to determine a value to place on your car and they are going to reimburse you based on that value. Unfortunately, they will use the cost to replace your vehicle and they will reduce it by what is called a depreciated amount. As we mentioned earlier, your car lost upwards of 30% of its value the minute you drove it off the lot!

What Does Gap Insurance Cover?

Gap insurance will cover any accident and theft. It is best to discuss your gap coverage with your insurance agent before you need it! Gap insurance is offered generally only on brand new cars that are going to be financed.

Crushed Car
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Is Gap Insurance Required?

When you apply for a loan for your new car, your lender will require full comprehensive and collision coverage but seldom will they require gap insurance. This is because they understand that in the event of a total loss, the borrower is responsible for the difference between what is paid by the insurance company and the balance of the loan.

Where Can I Buy Gap Insurance?

Although most car dealers routinely offer gap insurance, you should first determine if your existing policy covers has gap coverage. You should get a price quote from your existing insurance agency since gap insurance offered by dealers usually has a higher premium.

How Do I Know If My Insurance Company Offers Gap Insurance?

If considering a new car, talk to your insurance agent first. You may discover that your current auto insurance includes gap insurance. If not, find out if they offer it. Most insurance companies do offer gap insurance, if yours does not you may want to check with another insurer rather than purchasing gap insurance from a dealer.


Be safe when driving your new car, but do not leave your insurance to chance. Before you make that first trip to the dealership to purchase a new car, find out about gap insurance.

Related topics: auto insurance cost, lower auto insurance, online auto insurance




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