On occasion we receive calls asking about gap insurance so we wanted to take the opportunity to explain the coverage.
Gap Insurance only comes into play if a car has been totaled in an auto accident. Gap Insurance pays for the difference between the amount owing on the auto loan and the value of the car – what the insurance company will pay. This gap – is created when someone buys a car, normally new and makes a small or no down payment. You then drive the car off the lot and it typically depreciates 10%. During approximately the first three years if you are involved in an accident that is a total loss the insurance company will pay the value of the car but you are stuck owing the bank the difference between the loan and the value unless – you have gap insurance.
Gap insurance can be purchased through an independent insurance agent or through the car dealer. The cost to purchase this coverage through Anderson Insurance Group can cost between $5.00 and $20.00 per month and can be packaged with other new car benefits like new car replacement. Every company is different so look into the cost and the length of the gap insurance when purchasing from an insurance agent.
When purchased from a dealer the cost is rolled into your loan and is typically much more expensive but will normally cover you during the life of the loan. The cost of gap insurance can be negotiated with the dealer as well.
In summary, is gap insurance a good idea? It’s not a bad idea if you did not make a large down payment on your new car but compare the price between adding it to your insurance policy and buying it from the dealer. We think you will be pleasantly surprised to find gap insurance from Anderson Insurance Group as an add on to your current policy is much less expensive.