If you are considering purchasing a new car, you may be wondering what your options are when it comes to insurance. One coverage option that you may come across is AAA gap insurance. In this article, we will explore what gap insurance is, how AAA gap insurance works, and whether it is the right choice for you.
What is Gap Insurance?
First, it is important to understand what gap insurance is. Gap insurance is a type of car insurance that covers the difference between what you owe on your car and what it is worth in the event that your car is totaled or stolen.
The reason gap insurance is needed is because car insurance policies only cover the actual cash value (ACV) of your car. The ACV is determined by the market value of your car at the time of the accident, which could be significantly less than what you owe on your car loan.
For example, if you owe $20,000 on your car loan but your car is only worth $15,000 at the time of the accident, your insurance policy will only cover the $15,000. Gap insurance would cover the remaining $5,000 so that you are not left with a large debt to pay off.
How Does AAA Gap Insurance Work?
AAA gap insurance works in the same way as other gap insurance policies. It covers the difference between what you owe on your car loan and the ACV of your car in the event of a total loss or theft. AAA gap insurance can be added to your existing car insurance policy for an additional fee.
AAA gap insurance also includes additional benefits such as rental car coverage and reimbursement for your insurance deductible. These benefits can help you avoid additional out-of-pocket expenses in the event of an accident.
Is AAA Gap Insurance Right for You?
Whether AAA gap insurance is the right choice for you will depend on your individual circumstances. If you have a high loan balance on your car, you may benefit from having gap insurance to protect you in the event of a total loss or theft.
However, if you have a low loan balance or your car is worth more than what you owe, gap insurance may not be necessary. It is important to weigh the costs of the additional coverage against the potential benefits to determine whether AAA gap insurance is the right choice for you.
FAQ
Question |
Answer |
What is the cost of AAA gap insurance? |
The cost of AAA gap insurance will vary depending on your individual circumstances. It is best to contact your local AAA office or agent for a quote. |
When should I purchase AAA gap insurance? |
You should purchase AAA gap insurance when you purchase a new car and have a high loan balance. It is important to note that gap insurance can only be purchased within a certain time frame after the purchase of the car. |
Can I cancel AAA gap insurance? |
Yes, you can cancel AAA gap insurance at any time. However, it is important to note that you may not receive a refund for the portion of the premium that has already been paid. |
Does AAA gap insurance cover my car loan payments? |
No, AAA gap insurance only covers the difference between what you owe on your car loan and the ACV of your car in the event of a total loss or theft. |
Do I need AAA gap insurance if I have comprehensive insurance? |
Comprehensive insurance covers damage to your car from things like weather, theft, and vandalism. However, it does not cover the difference between what you owe on your car and the ACV of your car in the event of a total loss or theft. Gap insurance is designed to fill this gap in coverage. |
Conclusion
AAA gap insurance can be a useful coverage option for those who have a high loan balance on their car. It can help protect you from the financial burden of a large debt following a total loss or theft. However, it is important to carefully consider your individual circumstances and weigh the costs of the coverage against the potential benefits before making a decision.
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