Gap insurance is a type of auto insurance you may choose to invest in that covers the “gap” between how much you still owe on the vehicle and how much the vehicle is currently worth if you are in an accident. If your vehicle’s value has depreciated far lower than what you originally paid for it, the settlement you receive from your auto insurance company may not cover the rest of the money you still owe on the vehicle. The auto insurance settlement will often only cover the actual cash value of the vehicle, which can be far lower than the payments and accumulated interest you still owe on the vehicle. If the car was totaled, this could leave you with expensive bills and no car.
Gap insurance comes in to protect you from this situation. It can pay the difference between what you currently still owe on the vehicle and what you receive from the insurance company in the event that the car is totaled. This way, you are able to pay the loan that you used to purchase the car with even after a total loss. Gap insurance only covers vehicle damage and theft; it cannot be used for bodily injuries or engine failure.
When Would I Need Gap Insurance?
If you owe more money on your vehicle than it is currently worth, that may be an indication that gap insurance could be a worthwhile investment. This can be if your loan is four years or over, you paid less than a 20% down payment on the vehicle, or you do not have the savings to pay off the vehicle in the event it is totaled.
How Much Does Gap Insurance Cost?
Gap insurance costs vary depending on how and where you purchase it. If you purchase it from the dealership when you buy the vehicle, it is usually between $400-$700 for the year. If you add it to your current auto insurance, it is usually an additional $20-$40 per year. However, this is a good investment compared to the loss you may incur if you total a vehicle you still owe thousands on.
Contact Attorney Christine M. Smith R.N., M.S.N
If you have recently been involved in an auto accident and are not at fault, contact Attorney Christine M. Smith R.N., M.S.N. today at (603) 647-7200 and help protect your rights. Attorney Christine M. Smith R.N., M.S.N. is a personal injury lawyer and auto accident attorney serving Manchester, Nashua, Londonderry NH, and beyond.