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Gap Insurance

Gap insurance is an optional car insurance coverage that helps pay off your auto loan if your car is totaled or stolen and you owe more than the car's depreciated. Gap insurance helps pay the gap between the depreciated value of your car and what you still owe on the car.

Couple signing paperwork and getting car keys

Why would I need gap insurance?

If you're financing a new car, lenders require you to have collision and comprehensive coverage on your car insurance policy until your car is paid off.

Gap insurance is meant to be used in conjunction with collision coverage or comprehensive coverage. If you have a covered claim, your collision coverage or comprehensive coverage would help pay for your totaled or stolen vehicle up to its depreciated value. When you drive a brand-new vehicle off the lot, it loses 20% or more of its value in the first year, according to Kelly Blue Book (KBB).

But what if you still owe more on your loan or lease than the vehicle's depreciated value? That's where gap insurance may help.

Kelley Blue Book Logo

Is gap insurance worth it?

If you're considering buying gap insurance, it's important to remember that this type of coverage is only available if you're financing a new vehicle. Then, think about how much you owe on your auto loan versus the value of your car. You can get an estimate of what your car is worth by checking a site like KBB. Do you owe more than your car is worth? Could you afford to pay the difference out of pocket if your car is totaled?

You may want to consider gap insurance in the following situations:

  • If you made less than a 20 percent down payment on your vehicle
  • If your auto loan is 60 months or longer
  • You are carrying over negative equity from your prior auto loan
  • You drive in excess of 15,000 miles per year

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