Common Consumer Questions About Auto Insurance: What Is Gap Coverage?

June 1, 2022

When you buy a new car, RV, or light truck, the value of your vehicle begins to depreciate the moment you drive it off the dealer’s lot. The value of a vehicle you buy new can decline by as much as 20% in the first year that you own it — more if you put a lot of miles on it. Used vehicles may not depreciate as fast, but they also decline in value the longer you own them.

Auto depreciation isn’t a problem if you pay cash for your car, but most of us don’t do that. Putting too little money down can create a situation where you will be “upside-down” on your car note if your vehicle ever has to be totaled, leaving you having to make payments on a vehicle you can no longer drive.

That is unless your auto insurance policy includes gap coverage.

How Does Gap Coverage Work?

If you total your car, that is, if the cost of repairs exceeds the value of your car, so it has to be taken to the junkyard, or you possibly get to keep it with a salvage title (but not run it on the road), gap coverage pays the amount you still owe on it.

When Do You Need Gap Insurance?

It’s a good idea to consider getting gap insurance if you:

  • Purchased your vehicle with less than 20% down;
  • Have payments that run 60 months or more;
  • Bought a make or model that depreciates faster than average;
  • Rolled over the money you still owned on your last vehicle into your current loan;
  • Leased your car. (Gap coverage is usually required for auto leasing).

Where Can You Get Gap Insurance?

The dealer may offer you gap insurance when you buy your car, but it will be less expensive as part of your auto insurance policy.

Don’t hesitate to get gap coverage if you need it. Gap coverage usually only adds about $20 a year to the cost of your auto insurance.

Marian Sahakyan

Marian Sahakyan is a content writer and a journalism graduate from California State University, Long Beach with a background in marketing as well as UI and UX design. Marian’s previous writing and reporting has been featured in several community newspapers throughout Southern California.

We will be happy to hear your thoughts

Leave a reply