Gap Coverage

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Chris Tepedino is a feature writer that has written extensively about auto insurance for numerous websites. He has a college degree in communication from the University of Tennessee and has experience reporting, researching investigative pieces, and crafting detailed, data-driven features. His works have been featured on CB Blog Nation, Flow Words, Healing Law, WIBW Kansas, and ...

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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Reviewed by Rachael Brennan
Licensed Insurance Agent

UPDATED: Mar 13, 2020

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So you've decided to lease a vehicle - or better yet, you're fortunate enough to afford a brand new car. On the one hand, leasing or purchasing new means that maintenance and upkeep costs will be much lower. but at the same time, driving a new or leased vehicle can become very expensive if you don't find the right insurance policy. This is especially true if you don't add Gap coverage. below, will explain exactly what Gap coverage is and why it's so important on a newer vehicle.

Explaining Gap Insurance

If the worst case scenario ever happens and you get into a serious, total loss accident with a new or leased vehicle, things can get very expensive very quickly. This is because of the "gap" between the total value of the car as new and the depreciated value of the vehicle after you've driven it off the dealership lot.

It's very important that you make sure do you know the difference between these two numbers. That's because, unless you purchase Gap coverage from your insurance agent, your insurer will only pay out the depreciated value of your vehicle if it happens to get totaled in an accident. And whether you have a loan or a lease, you will be responsible for the difference between the depreciated value and the replacement of your vehicle as new. In the chart below, you can see what that might look like for your pocketbook.

Vehicle (2016) MSRP As New Depreciation Financial Gap
Honda Accord $22,205 $19,785 $2,420
Toyota Camry $23,070 $19,732 $3,338
Jeep Grand Cherokee $29,995 $17,476 $12,519
Ford F-150 $26,540 $16,563 $9,977

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Ways to Avoid Gap Insurance

If you're worried about how much more expensive your insurance policy will be with gap coverage, we want to reassure you that there are some affordable options out there. But then again, there are certain situations in which it may not make Financial sense to spend the extra money on this writer. It really all depends on the type of vehicle you are trying to cover.

Average Insurance Premiums: Old vs. New Car Legend: 2014 Honda Accord 2018 Honda Accord Alabama Texas Wisconsin Colorado Florida 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 $83 $142 $116 $172 $137 $180 $162 $210 $166 $176

Brand new vehicles (or leased ones) make the most sense to find Gap coverage for, because your Financial liability maybe so high that it takes a while to pay off that debt and afford a new one. While this may make your monthly premiums more expensive trauma you won't have to worry about maintenance costs or mechanical problems (like you would with an older vehicle), giving you a financial cushion to afford those higher premiums.

Older vehicles are easiest to purchase with cash up front, won't require a monthly car payment, and best of all - you'll be able to purchase less insurance coverage. however, maintenance costs on older vehicles can eventually become prohibitively expensive. You may eventually find yourself stuck with a broken down vehicle and no way to fix it - all because you were trying to go for the better deal.

Average Insurance Premiums: Old vs. New Car Legend: 2014 Honda Accord 2018 Honda Accord Kansas Missouri Nebraska Arkansas Massachusetts 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 170 180 190 200 210 $101 $174 $149 $216 $81 $147 $123 $187 $117 $201

How to Shop for Gap Insurance

When shopping around for gap insurance coverage, it won't take you long to discover that not all gap insurance policies are created equal. For starters, certain companies don't offer gap insurance at all, and it's important to check with an agent before signing the dotted line on a policy for a brand new vehicle. Other companies limit the amount of coverage they will provide (such as, for example, 25% of the original value of your new vehicle is a popular industry standard). furthermore, some car insurance companies have very strict rules in place that may disqualify you from purchasing Gap coverage in the first place. Many insurors only offer coverage for new vehicles. And companies like State Farm, for example, won't offer it all unless your auto loan is taken out through their own personal bank.

At the end of the day, it's important to make sure you know what you're getting into with a new car insurance policy - especially if your vehicle is brand new or being least. He's on your special quote generator can help you find the policy you need at the right you can afford. We invite you to take a look at quote available near you.

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