If your car is declared a total loss or stolen in North Carolina, gap insurance will pay the ‘gap’ between its depreciated value and the outstanding loan sum. Its main goal is to keep you from having to make a loan payment on a vehicle you no longer own (or avoid multiple car payments, if you decide to purchase another car with an outstanding loan balance).
Is gap insurance Worth the money?
Gap insurance is absolutely worth the money if you owe more on your car than it is now worth at any point in time. If you put down less than 20% on a car, you should consider getting gap insurance for at least the first couple of years. You should owe less on the car than it is worth by that time.
What does it mean to have a gap in your insurance?
Gap insurance is a type of supplemental auto insurance that kicks in if your automobile is stolen or declared a total loss. Gap insurance compensates the difference when your loan amount exceeds the value of your vehicle. If you owe $25,000 on your loan but your automobile is only worth $20,000, your gap coverage will cover the $5,000 difference, minus your deductible.
How long is gap coverage good for?
When acquired from a dealership, gap insurance lasts for the duration of the loan or lease, and when purchased from a normal auto insurance company, it lasts as long as it remains on the policy. Because gap insurance is ineffective when a car is worth more than the loan/lease balance, it’s normally only needed for one to two years.
If an automobile is deemed a total loss, gap insurance covers the difference between the loan or lease balance and the actual cash value. Gap insurance can protect drivers from having to make payments on a car that is no longer drivable because new cars depreciate quickly. However, because depreciation slows over time, the gap between the car’s value and the loan/lease total closes as the driver pays off the vehicle.
As a result, you should keep track of how much you owe and use internet tools like Kelley Blue Book to determine the car’s value. In general, after your loan or lease debt is $1,000-$2,000 less than the car’s value, it’s time to discontinue gap insurance.
Is gap insurance and full coverage the same?
Even if you have full coverage, gap insurance is required since full coverage does not cover the difference between what you owe on a loan/lease and the car’s actual cash value.
How much money do you get back from gap insurance?
After 22 months, if you decide you no longer require GAP insurance, you can request a refund for the remaining 14 months of coverage. Your refund will be $350 in this scenario.
How is gap insurance calculated?
- Your lease or loan may demand it: Your leasing or financing business may require gap insurance to safeguard you in the case of a total loss. However, just because it’s required doesn’t guarantee it’s included in your loan or lease, and you might be able to get it for less elsewhere.
- You paid a little down payment or chose a long lease: If you have a modest down payment or a lengthier lease, your automobile will lose value quicker than you can pay it off, especially in the first few years.
- You own a high-end or luxury vehicle: Luxury cars depreciate more quickly than other cars, so if you buy a Cadillac or Lexus, your loan amount is more likely to exceed the car’s worth.
- You drive a long distance in your automobile: While every car loses value the moment you drive it off the lot, traveling a long distance in a new car reduces the worth of the car far faster. The car’s value decreases as you drive it more miles.
How does a gap insurance refund work?
Contact the insurance company and provide the policy number as well as paperwork proving the automobile was traded in, sold, or paid off early to receive a gap insurance refund. Refunds for gap insurance are normally only available for policies that have been paid in full up front. Drivers who have never submitted a gap insurance claim are not eligible for a reimbursement.
You may be able to get a complete refund minus any cancellation costs if you cancel within 30 days of the policy’s commencement date. In other circumstances, you may only be able to get a partial refund. The specifics will be determined by your insurance and state legislation.
Can I cancel gap insurance?
Is it possible to cancel gap insurance? Yes. Gap insurance will no longer be worth it once you have less money to pay off on your loan than the real value of your car. When you’re ready to cancel your gap coverage, the good news is that you’ll be able to earn a prorated refund.
What makes a vehicle considered totaled?
When the cost of repairing a car exceeds the worth of the car, it is called totaled. They’re not required if your car is paid off. However, if your car is totaled and you don’t have comprehensive or collision coverage, you may have to pay for a replacement car out of pocket.
How does gap insurance work on a financed car?
If your automobile is totaled or stolen, and you owe more than the car’s depreciated worth, gap insurance might help you pay down your loan. Gap insurance bridges the gap between your car’s depreciated value and the amount you still owe on it.