After a year or two, you’ll find the value of your car depreciated. The amount an insurance company will pay to replace it could be thousands less than your car loan or lease balance. Your gap insurance works by helping pay the difference between your lease or loan amount and what your insurance coverage will pay if your car is totaled.
For example, say you total your car in an accident. You still have $10,000 left to pay on the loan, but your car is worth only $4,000. In this case, your gap insurance can help cover the difference between the two, up to your policy limits.
To purchase gap insurance, call The Hartford’s representatives at
888-413-8970 and get a quote.
Actual Cash Value
Your standard auto insurance policy helps pay for repairs and replacement based on the actual cash value (ACV) of your car. That’s the amount the car is worth on the current market, which decreases or depreciates as it ages. So, if someone steals your car or it’s totaled in an accident, the money the insurance company gives you may not be enough to pay off your car loan because you owe more than your vehicle is worth. This is where gap insurance can help you.
Is It Worth It To Get Gap Insurance?
Before you buy gap insurance, you should find out how much you still owe on your car loan. You can then compare it to how much your vehicle is worth. This will help you decide if you need gap insurance or not. The Insurance Information Institute also recommends gap insurance if you:
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- Put less than a 20% down payment on your car
- Plan to finance for 60 months or longer
- Bought a car that depreciates faster than others
- Have already rolled over negative equity from another car loan
- Lease your car, which usually requires gap coverage
How To Estimate the Value of Your Car
To estimate your car’s worth, you’ll need to look up the
Kelley Blue Book or
National Automobile Dealers Association value on your car. You can then compare it against the current balance on your auto loan or lease. Be sure to account for the deductible you’ll pay in the event of a crash or theft.
Once you know your car’s worth, you can talk to a representative about buying gap insurance or other extra coverage for your car. While gap insurance isn’t required by law, you’ll want to check your
state car insurance requirements to learn about other required coverages for your area.
What Does Gap Insurance Actually Cover?
If your car is stolen or considered a total loss after an accident, your gap insurance helps pay the difference between the actual cash value of your car and the amount you owe on your loan. However, it doesn’t help pay for:
- Your annual deductible
- Engine failure
- A down payment on a new car
- Rental cars while your vehicle is being repaired
- Aftermarket equipment costs
- Medical costs
- Funeral expenses
- Balances from prior loans or leases that are included in the new agreement
- Vehicles that were originally leased or financed as a used car and were previously titled or owned before you
- Motor homes
- Travel trailers
Do You Need Gap Insurance if You Have Full Coverage?
Even if you have
full coverage car insurance, you’ll still want to include gap insurance coverage, especially if you have a car lease or loan. The car dealership will usually offer gap insurance for lease vehicles. You also have the option to buy gap insurance from your auto insurance company, usually within 30 days of purchasing your new car. In the event of an accident, extended warranties will not cover the cost to pay off your loan if it’s more than your vehicle is worth. Gap insurance covers you, so you don’t have to pay out of pocket if your vehicle is totaled.
Gap Insurance From The Hartford
It’s not always easy finding car insurers that offer coverages to fit your needs. But you can rest assured that The Hartford’s comprehensive policies will have your back. In fact, customers like you have trusted us for over 200 years.
Last Updated: September 21, 2023
2 Edmunds, “How Much Should a Car Down Payment Be?”
3 Insurance Information Institute (III), “What Is Gap Insurance?”
