While your car insurance policy will cover the current value of your auto, you will still be responsible for the difference between that value and the amount of your car loan.
Since cars begin losing value as soon as they are driven out of the dealership, that difference covered by auto gap insurance can be a hefty chunk of change.
Take, for example, a driver who gets into an accident six months after he buys a $30,000 car. Once the auto is determined to be totaled, his car insurance company covers the $25,000 that the Kelley Blue Book says his car is now worth.
Taking into account his $1,000 deductible, the driver must come up with $6,000 of his own money if he wants to replace his vehicle.
Some auto gap coverage programs will pay for the entire $6,000, while others will cover the $5,000 gap while leaving the driver to pay the deductible.
Shopping around for the auto gap coverage that gives drivers the most bang for their buck will ensure an adequate level of coverage when needed.
When You Need Auto Gap Coverage
There are some circumstances that render auto gap coverage a practical necessity.
- It is a good idea for those taking out loans that will be carried longer than 60 months.
- It is also a wise expenditure for those who will be transferring an existing balance on a previous vehicle to a new loan.
- It may be a good option for those who are putting only a nominal down payment on their new car.
Some cars depreciate faster than others. Since depreciation drives the need for auto gap coverage, it is important to be aware how your car will be affected by this decline in value.
Searching for a “depreciation calculator” on your favorite search engine can lead you to a tool that will estimate the average depreciation of your vehicle.
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How to Find the Best Rates on Auto Gap Coverage
Auto gap coverage is often available where you get your car loan. The fee can be included in your loan or paid for separately. If you get your loan from a bank, the average rate for auto gap coverage is $500.
If you get your loan from a bank, the average rate for auto gap coverage is $500. If your loan is serviced by a credit union instead of a bank, the average rate goes down to $250.
You may also be able to add auto gap coverage to your existing auto insurance policy. This amount will be based on the value of your car and will be charged with each premium.
It is easy to forget about the extra charge and to maintain auto gap coverage even when it is no longer a fiscal necessity to carry such coverage.
If you get coverage through your auto insurance provider, be sure to stay on top of things and to cancel that extra coverage as soon as it becomes financially prudent.
The online car insurance comparison tool provides a quick and easy way to line up quotes from a variety of different insurance and auto gap coverage providers.
Just enter your information one time to receive quotes from a variety of well-respected car insurance and auto gap coverage providers.
It is important to compare all aspects of coverage, as well as the rates when deciding how to proceed with auto gap coverage. Be aware of exactly what is covered and what is not.
For example, a driver could find himself responsible for coughing up the entire gap if his car is stolen when his auto gap coverage policy specifically listed “theft” in the fine print as a type of loss that they would not, in fact, cover.
Enable Auto Gap Coverage Today
Significant gaps between a car’s replacement value and the amount of the loan are a common problem today, leaving many drivers in the hole in the event of an accident.
By thoroughly researching the different methods of procuring this coverage, you can protect yourself from the unfortunate possibilities spurred by auto depreciation.
Be aware of the different forms of coverage—from those that pay the exact difference between a car’s current value and the amount still owed on a loan, to those that offer auto replacement even when the cost has increased—and you will find the ideal coverage for your situation at the ideal price.