So you’re at the dealership signing paperwork for your new vehicle. The finance rep goes over your monthly payments and the additional coverages and warranties availalble. They bring up gap insurance and breeze by it. When you ask for more information they give you the usual talking points but love to say, “Don’t worry, it’s already factored into your monthly payments!”
What is Gap Insurance?
Let’s start with the basic tutorial. Gap insurance is an optional coverage that applies if your car is stolen or deemed a total loss. When your loan amount is more than your vehicle is worth, gap insurance pays the difference. For example, if you owe $20,000 on your loan and your car is only worth $15,000, gap insurance covers the $5,000 gap.
If there is no loan or if you paid a large down payment on your vehicle purchase then you do not need gap insurance. Anytime your vehicle is fully or mostly financed, gap insurance is recommended.
Should You Buy From A Dealer?
The answer is almost always no. Gap insurance is available from most auto insurance carriers and it’s much, much cheaper through auto insurance companies. Dealerships can charge $500 or more per year for gap insurance while the typical premium on an auto insurance policy is a few dollars per month!
Gap Insurance can go by other names like loan/lease payoff coverage or be included in larger coverage packages.
Always ask your insurance agent about gap coverage before purchasing it from the dealership.
"True heroism is remarkably sober, very undramatic. It is not the urge to surpass all others at whatever cost, but the urge to serve others at whatever cost."
— Arthur Ashe
— Dove Insurance (@DoveInsurance) June 23, 2022