Complete 2024 Guide To Gap Insurance Cost

 

What is Gap Insurance and Why Do I Need It?

The value of your car begins dropping the moment you buy it and drive it off the lot. In the event that you total or seriously damage your car, guaranteed auto protection, or gap insurance, covers the gap between the vehicle’s current value and the amount you still owe on it. Gap insurance takes the original value of your car into account, not just its current cash value.
According to the Insurance Information Institute, most cars depreciate at the rate of 20% in the first year following their purchase. Let’s say you purchased the latest model Toyota Corolla for $20,000. After a year, the car will have depreciated to $16,000. If your car is totaled in an accident in that period and you have gap insurance, rather than getting just the current cash value of the car, you’ll get its original worth of $20,000

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How Much Does Gap Insurance Cost?

According to Investopedia, the average gap insurance policy cost can range between $500 to $700 annually. NerdWallet, on the other hand, argues that gap insurance should cost you as little as $20 to $40 a year.
Why are these two price ranges so different? If you get a gap insurance policy added to your overall coverage, it’s likely to cost you less. Whereas gap insurance often costs you more if you purchase it as a separate policy.

Additionally, the cost of your premiums may be increased if you have to pay off a loan or the lease amount for your car.

Gap insurance cost depends on many factors. The model number of your car, its brand, the materials used in making it, and the dealer are thoroughly considered before determining the price.

More factors that determine the cost of gap insurance include:

• Homeownership
• DUI charges/convictions
• Age
• Gender
• The state you live in
• Driving history
• Credit score

Is Gap Insurance Actually Worth It?

Very often, yes, depending on your particular circumstances.

Here’s a list of ideal scenarios for obtaining gap insurance:

• Your down payment for your car is less than 20% of the total sum.
• You’re considering adding your outstanding car loan to a new loan sum.
• Your car loan is for a 60-month period.
• You’re planning to purchase a budget-friendly car. (Less expensive cars tend to lose their value at a faster rate.)

Having gap insurance would allow you to easily manage your loan payments in case of any serious damage to the vehicle. If you’re likely to get more value from the policy in comparison to the premium cost, the policy is worth it.

When Does Gap Insurance Not Pay?

Although gap insurance may seem like an excellent umbrella insurance for your car, its purpose is pretty specific.

Typically, gap insurance doesn’t cover:

• Paying off your car loan in case of unemployment
• Paying off the loan in case of disability
• Reimbursement in cases of minor accidents
• Rental cars

Where Should I Buy Gap Insurance?

Now that you have a clearer idea about the policy, let’s take a look at how gap insurance companies work. These are the places where you will find gap insurance at a cost that’s reasonable:

• Your current auto insurer
• An insurance company that specializes in gap insurance
• Your lender (you can include the coverage costs in the loan payments you make)
• The dealer you got the car from

Gap Insurance Companies

While there do seem to be many options for a gap insurance provider, we recommend getting the policy from a reliable insurance company. A few good examples are:

• American Family
• USAA
• Travelers
• Safeco
• Nationwide Insurance
• Liberty Mutual
• Auto-Owners Insurance

Note: USAA generally only caters to the military, veterans, and their families.

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How Does Gap Insurance Compare to Other Car Insurance Policies?

Whatever car insurance policy you get, you are likely to have to go through a tedious auto insurance claim process. However, understanding the difference between policies and how they compare to gap insurance will help you better understand what policies best meet your needs.

Liability Insurance

Unlike gap insurance, in order to be a driver, you must have general liability insurance. It’s mandatory in most states. Liability insurance mainly covers the damage you may have caused to third parties. It often saves you money in situations where you are legally bound to pay for the other party’s loss.

Liability Insurance Cost (Annual Average)	$600-$800
Gap Insurance Cost (Annual Average)	$500-$700

Collision Insurance

Collision insurance specifically addresses accidents that involve colliding with another vehicle. This is often used as an additional policy in general car insurance coverage. However, unlike gap insurance, this policy will only pay for the current market value of your car.

Collision Insurance Cost (Annual Average)	$250-$400
Gap Insurance Cost (Annual Average)	$500-$700

Personal Injury Protection (PIP) Insurance

As the name suggests, the policy helps you cover medical bills in case of bodily injury. The terms and conditions can vary. The policy will often cover up to 80% of expenses. A gap insurance policy and personal injury insurance policy are generally bundled together in the same coverage.

PIP Insurance Cost (Monthly Average)	$50-$200 (costs depends largely on age and medical history)
Gap Insurance Cost (Monthly Average)	$30-$60

Commercial Car Insurance

Commercial auto insurance or taxi insurance is appropriate for people who make their livelihood through their car, or use them as part of their business. It covers accidents that may happen while using the vehicle while on business or for business purposes. A standard business owners policy will often include this type of coverage as well.

Gap insurance is generally recommended for inclusion in commercial car policies.

Commercial Car Insurance Cost (Monthly Average)	$135-$150
GAP Insurance Cost (Monthly Average)	$30-$60

Classic Car Insurance

Classic car insurance is the opposite of gap insurance. While your standard affordable sedan might lose up to 60% of its original price in the first five years, a classic car only increases its market value as the years go by, assuming it’s kept in good condition. Anyone who has a classic car insurance policy doesn’t require a gap insurance policy as it simply doesn’t carry any real benefit for them.

Classic Car Insurance Cost (Annual Average)	$200-$600 (can go over $1000 if your car is of higher value)
Gap Insurance Cost (Annual Average)	$500-$700

How Does Insurance Agents Help You Save Money?

If you want an affordable insurance near me then you should consider using the help of an insurance agent. Insurance agents are knowledgeable professionals who can help you compare rates from multiple insurance companies and find the best coverage at the lowest cost.

Compare Insurance Policies

An insurance agent will help you save money by taking the time to compare insurance policies and rates from different carriers. They can also help you understand the different coverages and deductibles associated with each policy. This is helpful if you’re trying to find the balance between coverage and cost. By understanding your insurance options, you can make more informed decisions and save money in the long run.

Skilled and Knowledge

An insurance agent will be your best person when it comes to finding the appropriate insurance for your needs. They will have access to a variety of policies and carriers, allowing them to provide personalized advice that meets your needs. The best insurance agent near me will also help you understand your insurance coverage and help you make informed decisions.

They Provide Discounts

Insurance agents will also help you save money by helping you look for discounts. There are often discounts available for bundling multiple policies, taking safety courses, or having a good driving record. An experienced agent will help you identify possible discounts and provide you the best deals.