What Is Gap Insurance? | Allstate Insurance


No one wants to think about anything bad happening
to your brand-new car. But what if it gets damaged — or even totaled? Your auto lender may require comprehensive
and collision coverage. These car insurance coverages help pay to
replace a totaled vehicle, but they factor in depreciation to the value of the car. The problem is, a new car loses value the
moment you drive it off the lot. So, if your new car is totaled, you could
end up owing more on your loan or lease than its depreciated value. Loan or lease gap coverage helps pay the difference. Say you bought your car for $25,000. A while later, your car is totaled in a covered
accident. You still owe $20,000 on your loan or lease,
but your car’s depreciated value is $19,000. Your comprehensive or collision coverage would
pay only up to the depreciated value. If you had gap coverage on your car insurance
policy, it would help pay the extra $1,000 to your auto lender — so you don’t have
to pay it out of pocket. Keep in mind, gap coverage helps pay off your
loan or lease on a totaled car — one that’s no longer driveable. But it doesn’t pay for a new car. For that, you’d need another optional coverage
called “new car replacement coverage.” If you own or lease a brand-new car, consider
adding loan or lease gap coverage to your car insurance policy. Check with your insurer to see if your vehicle
qualifies.

2 comments

A quick call to us about GAP coverage could save you a few hundred dollars compared to the cost at a dealer.

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