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Gap Insurance Cost 2021

Gap insurance is car insurance coverage that pays for the “gap” between what a car is worth and what the driver owes on their auto loan or lease if the car is totaled or stolen. Read on to learn more. 

Gap Insurance Cost

The cost of gap insurance varies depending on where you buy it. Dealerships and banks are the most expensive choice, often up to $800. Since the sum is usually added to your auto loan, you will have to pay interest on it, too. The best deals on gap insurance are generally available from car insurance companies, which charge as little as $5 per month for coverage.

How Gap Insurance Works

If a buyer or lessee were to suffer a total loss without gap insurance, standard insurance would only cover the actual cash value of the car, leaving the driver potentially owing thousands of dollars to the lender. A gap forms as a result of a car depreciating faster than the loan or lease amount can be paid off. A new car loses about 10 percent of its value the moment you drive it off the lot, and it depreciates by about 20 percent within the first year, according to Edmunds. For example, let’s say you buy a new Honda Accord for $27,000. The day it’s purchased, the car’s “actual cash value” (ACV) falls to approximately $24,300. One year later the actual cash value might be approximately $21,600. In other words, gap insurance coverage would pay all of the nearly $3,000 deficit in this scenario. Depending on the details of your policy, it may also cover the $500 deductible.

In summary, gap coverage works alongside liability, collision and comprehensive insurance to protect car owners with negative equity. 

Source: https://wallethub.com/edu/ci/gap-insurance/9002

Auto Insurance Quotes

From offering liability protection to you and your family to helping you get reimbursed for personal property damage, auto insurance provides many types of coverage. Learn more about Auto Insurance Coverage or get a free auto insurance quote from Klimes Insurance today.

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