Gap insurance is an optional car insurance coverage that helps pay the difference between what your car is worth and what you still owe on it if your car is totaled or stolen. The cost of gap insurance varies depending on the insurance company, the value of your car, and the length of your loan or lease. In this article, we'll break down how much gap insurance typically costs per month and explore some factors that can affect the price.
Gap insurance is especially beneficial if you have a new car or a car that is worth more than you owe on it. If your car is totaled or stolen, gap insurance can help you avoid being upside down on your loan or lease, which means you owe more than the car is worth. This can save you thousands of dollars and provide peace of mind knowing that you won't be stuck with a large debt after an accident.
Now that you know a little bit more about gap insurance, let's take a closer look at how much it typically costs per month.
how much is gap insurance per month
Gap insurance cost varies depending on several factors.
- Insurance company
- Car's value
- Loan or lease term
- Deductible
- State regulations
- Type of vehicle
- Mileage
- Credit score
Typically ranges from $10 to $50 per month.
Insurance company
The insurance company you choose can have a significant impact on the cost of your gap insurance.
- Larger insurance companies
Tend to offer gap insurance at a lower cost than smaller companies.
- Shop around and compare quotes
From multiple insurance companies to find the best rate.
- Ask about discounts
Many insurance companies offer discounts on gap insurance if you bundle it with other policies, such as your auto insurance or homeowners insurance.
- Read the fine print
Make sure you understand the terms and conditions of the gap insurance policy before you purchase it.
By following these tips, you can save money on your gap insurance and get the coverage you need to protect your investment.
Car's value
The value of your car is a major factor that affects the cost of gap insurance. The more your car is worth, the more gap insurance will cost. This is because gap insurance covers the difference between the actual cash value of your car and the amount you still owe on your loan or lease. If your car is worth more, the gap between the two will be greater, and so will the cost of gap insurance.
For example, if you have a car that is worth $20,000 and you still owe $15,000 on your loan, the gap between the two is $5,000. If your car is totaled or stolen, gap insurance would pay the $5,000 difference so that you wouldn't have to pay anything out of pocket.
If you have a car that is worth less than you owe on it, gap insurance may not be worth the cost. For example, if you have a car that is worth $10,000 and you still owe $15,000 on your loan, the gap between the two is $5,000. However, if you were to file a claim with your gap insurance company, you would only receive $10,000, which is the actual cash value of your car. This means that you would still have to pay the remaining $5,000 out of pocket.
Ultimately, the decision of whether or not to purchase gap insurance is a personal one. You should weigh the cost of gap insurance against the potential financial risk of being upside down on your loan or lease if your car is totaled or stolen.
Here are some additional factors that can affect the cost of gap insurance:
Loan or lease term
The length of your loan or lease term can also affect the cost of gap insurance. The longer your loan or lease term, the more time you have to pay off your debt. This means that the gap between the value of your car and the amount you owe on it will be greater, and so will the cost of gap insurance.
For example, if you have a 60-month loan on a car that is worth $20,000, the gap between the two will be greater than if you had a 36-month loan on the same car. This is because you have more time to pay off the loan, and the value of the car will depreciate over time.
As a result, gap insurance will cost more for a longer loan or lease term than it will for a shorter term. This is because the insurance company is taking on more risk by insuring a car that is worth less than the amount you owe on it.
If you are considering purchasing gap insurance, be sure to factor in the length of your loan or lease term when you are shopping for quotes. You may be able to save money by choosing a shorter term.
Here are some additional factors that can affect the cost of gap insurance:
Deductible
The deductible is the amount of money that you are responsible for paying out of pocket before your gap insurance coverage kicks in. The higher your deductible, the lower your gap insurance premium will be. However, you should choose a deductible that you can afford to pay in the event that you need to file a claim.
- $0 deductible
This is the highest level of coverage, but it also comes with the highest premium.
- $100 deductible
This is a common deductible amount that offers a good balance between cost and coverage.
- $250 deductible
This is a lower deductible amount that will result in a lower premium, but you will have to pay more out of pocket if you need to file a claim.
- $500 deductible
This is the lowest deductible amount, but it also comes with the lowest premium. However, you will have to pay the most out of pocket if you need to file a claim.
When choosing a deductible, you should consider your budget and your risk tolerance. If you are on a tight budget, you may want to choose a higher deductible to save money on your premium. However, if you are worried about having to pay a large amount of money out of pocket if you need to file a claim, you may want to choose a lower deductible.
State regulations
State regulations can also affect the cost of gap insurance. In some states, gap insurance is regulated by the state insurance department. This means that the state sets the maximum rate that insurance companies can charge for gap insurance. In other states, gap insurance is not regulated, which means that insurance companies are free to set their own rates.
If you live in a state where gap insurance is regulated, you can expect to pay a lower rate for gap insurance than if you live in a state where gap insurance is not regulated. This is because the state insurance department sets a cap on the maximum rate that insurance companies can charge.
Even in states where gap insurance is regulated, there can still be some variation in the rates that different insurance companies charge. This is because insurance companies are allowed to set their own rates within the maximum rate set by the state. As a result, it is important to shop around and compare quotes from multiple insurance companies before you purchase gap insurance.
In addition to regulating the rates that insurance companies can charge for gap insurance, some states also have laws that require insurance companies to offer gap insurance to their customers. This means that you can be sure that you will be able to purchase gap insurance if you live in one of these states.
Here are some additional factors that can affect the cost of gap insurance:
Type of vehicle
The type of vehicle you drive can also affect the cost of gap insurance. Some vehicles are more expensive to insure than others. For example, sports cars and luxury vehicles typically have higher gap insurance rates than sedans and SUVs.
- New vehicles
Typically have higher gap insurance rates than used vehicles.
- Leased vehicles
May have higher gap insurance rates than vehicles that are purchased outright.
- Vehicles with high depreciation rates
May have higher gap insurance rates than vehicles with low depreciation rates.
- Vehicles that are used for commercial purposes
May have higher gap insurance rates than vehicles that are used for personal purposes.
When you are shopping for gap insurance, be sure to tell the insurance company the type of vehicle that you drive. This will help them to give you an accurate quote.
Mileage
The mileage on your car can also affect the cost of gap insurance. Insurance companies typically charge higher rates for vehicles with high mileage. This is because vehicles with high mileage are more likely to be involved in accidents and to have mechanical problems.
For example, if you have a car with 100,000 miles on it, you will likely pay a higher gap insurance rate than if you have a car with 50,000 miles on it. This is because the insurance company is taking on more risk by insuring a car with more miles on it.
If you are considering purchasing gap insurance, be sure to tell the insurance company the mileage on your car. This will help them to give you an accurate quote.
In addition to the factors listed above, there are a few other things that can affect the cost of gap insurance. These include:
- Your credit score
- Your driving record
- The age of your car
Credit score
Your credit score can also affect the cost of gap insurance. Insurance companies typically offer lower rates to customers with good credit scores. This is because customers with good credit scores are seen as being less risky.
- Excellent credit score (720+)
May qualify for the lowest gap insurance rates.
- Good credit score (670-719)
May qualify for slightly higher gap insurance rates than customers with excellent credit scores.
- Fair credit score (620-669)
May qualify for even higher gap insurance rates.
- Poor credit score (below 620)
May have difficulty finding gap insurance at an affordable rate.
If you have a poor credit score, you may want to consider working on improving it before you purchase gap insurance. This could help you to get a lower rate.
FAQ
Here are some frequently asked questions about gap insurance and how it relates to your monthly payments:
Question 1: How much does gap insurance cost per month?
Answer 1: The cost of gap insurance per month varies depending on several factors, including the insurance company, the value of your car, the length of your loan or lease, the deductible you choose, and your state regulations. Typically, gap insurance costs between $10 and $50 per month.
Question 2: Is gap insurance worth it?
Answer 2: Gap insurance can be worth it if you have a new car or a car that is worth more than you owe on it. If your car is totaled or stolen, gap insurance can help you avoid being upside down on your loan or lease, which means you owe more than the car is worth.
Question 3: How long does gap insurance last?
Answer 3: Gap insurance typically lasts for the length of your loan or lease. However, some insurance companies offer gap insurance policies that can be renewed after the initial term expires.
Question 4: Can I cancel gap insurance?
Answer 4: Yes, you can cancel gap insurance at any time. However, you may have to pay a cancellation fee. If you cancel gap insurance, you will no longer be covered if your car is totaled or stolen.
Question 5: What happens if my car is totaled and I have gap insurance?
Answer 5: If your car is totaled and you have gap insurance, the insurance company will pay the difference between the actual cash value of your car and the amount you still owe on your loan or lease. This will help you to avoid being upside down on your loan or lease.
Question 6: What are some tips for saving money on gap insurance?
Answer 6: There are a few things you can do to save money on gap insurance, such as shopping around for quotes from multiple insurance companies, choosing a higher deductible, and bundling gap insurance with other policies, such as your auto insurance or homeowners insurance.
Question 7: Where can I learn more about gap insurance?
Answer 7: You can learn more about gap insurance by talking to your insurance agent, reading articles and reviews online, and visiting the websites of insurance companies that offer gap insurance.
Closing Paragraph for FAQ
Gap insurance can be a valuable coverage to have if you have a new car or a car that is worth more than you owe on it. By understanding how gap insurance works and how much it costs, you can make an informed decision about whether or not to purchase it.
Now that you know more about gap insurance and how it relates to your monthly payments, here are some tips for saving money on gap insurance:
Tips
Here are some tips for saving money on gap insurance:
Tip 1: Shop around for quotes.
The cost of gap insurance can vary significantly from one insurance company to another. Be sure to get quotes from multiple insurance companies before you purchase gap insurance. You can use an online quote comparison tool or contact insurance companies directly to get quotes.
Tip 2: Choose a higher deductible.
The deductible is the amount of money that you are responsible for paying out of pocket before your gap insurance coverage kicks in. The higher your deductible, the lower your gap insurance premium will be. However, you should choose a deductible that you can afford to pay in the event that you need to file a claim.
Tip 3: Bundle gap insurance with other policies.
Many insurance companies offer discounts on gap insurance if you bundle it with other policies, such as your auto insurance or homeowners insurance. If you have multiple policies with the same insurance company, be sure to ask about bundling discounts.
Tip 4: Consider aftermarket gap insurance.
Aftermarket gap insurance is a type of gap insurance that is sold by dealerships and other third-party companies. Aftermarket gap insurance is typically more expensive than gap insurance that is purchased from an insurance company. However, it may be a good option for people who have difficulty qualifying for traditional gap insurance.
Closing Paragraph for Tips
By following these tips, you can save money on gap insurance and get the coverage you need to protect your investment.
Now that you know how to save money on gap insurance, you can make an informed decision about whether or not to purchase it.
Conclusion
Gap insurance can be a valuable coverage to have if you have a new car or a car that is worth more than you owe on it. By understanding how gap insurance works and how much it costs per month, you can make an informed decision about whether or not to purchase it.
If you decide to purchase gap insurance, be sure to shop around for quotes from multiple insurance companies and compare prices. You should also consider choosing a higher deductible to lower your premium. If you have multiple policies with the same insurance company, you may be able to get a discount on gap insurance by bundling it with your other policies.
Gap insurance can provide peace of mind knowing that you are protected if your car is totaled or stolen. If you are considering purchasing gap insurance, be sure to talk to your insurance agent to get more information and to get a quote.
Ultimately, the decision of whether or not to purchase gap insurance is a personal one. However, by following the tips in this article, you can save money on gap insurance and get the coverage you need to protect your investment.