What Is Gap Insurance?
Standard auto insurance policies protect the depreciated value; which means insurance pays the current market value of the vehicle. When you finance the purchase of a new car and drop a small deposit, the amount of the loan may exceed the market value of the vehicle in its early years of ownership. Gap insurance is available to cover the “gap” between what a vehicle is worth and what you owe on it.
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Financed for 60 months or longer.
Leased the vehicle.
Purchased a vehicle that depreciates faster than the average.
Rolled over negative equity from an old car loan into the new loan.
A car dealer may offer to sell you gap insurance on your new vehicle, most car insurers offer it—and it typically costs much less. For most auto insurance policies, including gap insurance with collision and comprehensive coverage adds only about $20 a year to the annual premium.