What is the Average Cost of Gap Insurance?

Gap insurance is an add-on insurance policy that covers the difference between what you owe on your car loan and the actual cash value of the car in case of theft or total loss. The gap insurance policy is a common choice for car buyers who want to protect themselves from financial loss when their vehicle gets into an accident or stolen.

But, how much does gap insurance cost? In this article, we will discuss the average cost of gap insurance and everything you need to know before getting the policy.

What Affects the Cost of Gap Insurance?

The cost of gap insurance varies depending on several factors such as the type of car you own, your location, your credit score, and the insurance company you choose. Below are the details of each factor that affects the gap insurance cost:

Type of Car

The make and model of your car impact the cost of gap insurance. Generally, newer and more expensive cars require more financial protection, which causes the gap insurance policy to be more expensive. Luxury cars and sports cars are also more expensive to cover.

According to industry data, the average cost of gap insurance for a new car is $700. However, the cost can range from $200 to $1,500 depending on the vehicle’s value.

Location

Your location influences the cost of gap insurance because the state laws and regulations can affect the coverage and the insurance rates. For example, some states have higher rates because of a higher risk of theft or accidents, while other states have lower rates due to fewer claims.

The average cost of gap insurance also varies by state. In states like California, Texas, and Florida, the average cost ranges from $300 to $800, while in states with lower insurance rates, such as Maine or Vermont, the gap coverage may be as low as $200.

Credit Score

Your credit score affects the cost of gap insurance because insurance companies use it to determine the risk and probability of making a claim. The higher your credit score, the lower the cost of gap insurance.

If you have a good credit score, you can expect to pay less than someone with a poor credit score. Most insurance companies require a credit score of 620 or higher to qualify for the best rates.

Insurance Company

The cost of gap insurance can also vary depending on the insurance company you choose. Some companies charge a higher premium or deductible, while others offer discounts or bundle options that can lower the cost.

Shopping around and comparing quotes from different insurance providers is the best way to find the most affordable gap insurance policy.

What is the Average Cost of Gap Insurance?

As discussed earlier, the cost of gap insurance depends on several factors, including the vehicle’s value, location, credit score, and insurance company. The following table provides the estimated cost of gap insurance based on these factors:

However, keep in mind that these costs are just an estimate, and the actual price may vary depending on your specific situation.

Frequently Asked Questions

What does gap insurance cover?

Gap insurance covers the difference between what you owe on your car loan and the actual cash value of the car in case of theft or total loss.

Is gap insurance worth it?

Gap insurance is worth it if you have a car loan and owe more than the car’s value. If your car gets into an accident or stolen, gap insurance can help you avoid financial loss.

Do you need gap insurance if you have full coverage?

Full coverage insurance does not cover the difference between the car’s value and the loan amount. Therefore, if you have a car loan and owe more than the car’s value, you may need gap insurance.

Can you buy gap insurance after buying a car?

Yes, you can buy gap insurance after buying a car. Some insurance companies offer gap insurance as an add-on policy, while others allow you to purchase it separately.

How long does gap insurance last?

Gap insurance usually lasts for the duration of the car loan. Once you pay off the loan or refinance, the coverage ends.

Can you cancel gap insurance?

Yes, you can cancel gap insurance at any time by contacting your insurance company. However, you may need to provide proof that the loan is paid off or refinanced.

Conclusion

In conclusion, the average cost of gap insurance depends on several factors such as the type of car, location, credit score, and insurance company. While the average cost of gap insurance for a new car is $700, the actual cost may vary depending on your specific situation. When buying gap insurance, it is essential to shop around and compare quotes from different insurance providers to find the most affordable policy that meets your needs.