A gap insurance policy is one of the essential car insurance policies you can purchase. It serves as an extension to your auto loan and will help fill in the gaps that your insurance won’t cover, like paying off your vehicle if it’s totaled or stolen or replacing a lost set of keys. But it’s not always easy to find out whether you need gap insurance or what type of coverage is best for you. That’s why we’ve put together this complete guide on everything about gaps.
If you are in the market for car insurance, your dealer will likely be offered Gap Insurance. It is a form of motor insurance that covers the difference between the value of your vehicle and what you owe on it if it is written off or stolen.
Many people are unaware that Gap Insurance exists as an option and therefore do not buy it with their policy; however, this can lead to losing more than they thought they would.
Gap insurance is a product that can help you recover the costs of replacing your car if it is stolen or written off in an accident. It is usually sold with car finance, and it covers the difference between the amount you still owe on your finance agreement and how much your insurer pays to replace it.
Gap insurance, also known as GAP insurance or auto GAP insurance, is a type of motor car insurance that covers the difference between your car’s actual cash value and the balance you still owe on your loan in the event of an accident or theft.
What is Gap Insurance?
Gap insurance, also known as a GAP policy, is auto insurance available in Canada and the United States. It covers the difference between your car’s actual cash value and what you owe on it. In other words, if your vehicle was stolen or totaled and you still owed money on it, gap insurance would cover that difference.
The chances of needing a gap insurance policy are slim, but it often becomes a genuine concern for drivers. A vehicle is stolen in Canada every hour, and it’s one every 34 minutes in the US. Total lossesGap insurance is coverage for car owners, which will reimburse the owner for the difference between their car is worth and what they still owe on the car loan.
Gap insurance can be used in three ways:
- When the vehicle is stolen or totaled in an accident, gap insurance will cover the difference between how much money the owner owes on it and how much it’s worth.
- Gap insurance can also be used to cover damages that occur after an accident or theft, such as when a garage door closes on a vehicle and does damage to it.
Why do I need it?
It is a kind of coverage that covers the loss or damage to the insured vehicle during transport to the location where it is to be repaired after an accident. It protects you against financial loss if your car is towed for a long distance for repair that exceeds its value.
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Gap insurance is one of the most misunderstood types of auto insurance. It is often confused with the more familiar (and more expensive) comprehensive and collision policies required in most states. Gap insurance is not currently required by law, but it still provides many benefits to consumers.
If your vehicle is totaled and has negative equity, gap insurance pays the difference between what you owe on your loan and what your insurer covers for the declared value of your vehicle.
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How much does it cost?
Gap insurance is necessary if you’re financing or leasing a new car, and it protects you from the difference between your vehicle’s worth and the amount you owe on your loan, should it be stolen or totaled in an accident.
Gap insurance will cost anywhere between $60-$350 per year depending on the make, model, age, and other factors. If you’re financing or leasing a vehicle, Gap insurance is usually included in your finance contract. If not, you can generally purchase coverage at a dealership or bank when you close on your loan or lease.