What is Gap Insurance or Loan/Lease Coverage?
Gap insurance, short for Guaranteed Asset Protection Insurance, is similar to what Northern Neck Insurance calls Loan/Lease Coverage. New vehicles can lose value quickly, and in some cases your car may be worth less than the remaining balance on your auto loan or lease. If your car is totaled in a crash or stolen and the cost to repair or replace it is higher than its current value, you could be responsible for paying the difference between what you still owe and what the vehicle is worth today—even if you already carry Liability and Collision Coverage on your auto policy.
That's where gap insurance can protect you. The coverage is specifically for drivers who still owe a balance on their vehicle, so if you own your car outright, you don’t have a need for gap insurance. Gap insurance is usually only needed for one to three years or until your vehicle is worth more than you still owe on your loan or lease.
Who may need gap insurance?
Gap insurance is especially important if you owe more on your car loan or lease than your vehicle is currently worth (often called being “upside-down”). If your car is totaled or stolen, this coverage helps pay the difference between the actual cash value of the vehicle and the remaining balance on your loan or lease. It is particularly recommended when you have rolled negative equity from a prior loan into your current one.
You also may need gap Insurance if:
- Your lender or lesser requires it.
- Your car has a high rate of depreciation.
- You put less than 20% down payment on the car purchase.
- You finance or lease a vehicle for a long term (60+months).
- Your loan or contract has a high-interest rate.
Difference Between Gap Insurance and Car Insurance
Regular car insurance, also called Liability and Collision Car Insurance, covers the cost to repair or replace your car and/or another driver's car if you're at fault up to its depreciated value, potentially creating a gap in coverage. Full coverage car insurance, which also includes Comprehensive Car insurance, covers damage to a vehicle caused by something other than a collision up to its depreciated value. Comprehensive insurance is not required by Virginia state laws, but drivers are usually required to have it for a leased or financed vehicle.
How Much is Gap Insurance in Virginia?
Gap insurance is not usually expensive. Virginia gap insurance costs an average of $2 to $30 per month, depending on whether you buy it from a dealership, a car manufacturer, or your insurance provider. It can range anywhere between $200 to $700 in total from a car maker, dealership, or lender. You can also add the coverage to your existing car insurance for about $15 to $40 per year in added premium. Buying gap insurance directly from your insurance company is usually the cheapest option.
Gap Insurance vs Gap Waiver
You may be able to avoid buying gap Insurance if you get a gap waiver, also called a gap addendum. This supplement to your auto loan or lease absolves you from paying the difference between what you owe on the vehicle and what it's worth if the vehicle is declared a total loss. It's usually less expensive than buying insurance coverage.
Our Car Insurance Options in Virginia
Northern Neck Insurance offers a full line of auto insurance coverages tailored for Virginians, including Liability and Collision Coverage, Comprehensive Coverage, and Loan/Lease Coverage. Our Loan/Lease Coverage must be purchased within 30 days of leasing or purchasing a vehicle. Give us a call or contact your local car insurance agent.
Learn more about car insurance in Virginia
THE NORTHERN NECK INSURANCE INTEGRITY PROMISE — We pledge to provide straight talk and good counsel from our NNINS Virginia insurance experts through our blog. While we hope you find this to be a helpful source of information, it does not replace the guidance of a licensed insurance professional, nor does it modify the terms of your Northern Neck Insurance policy in any way. All insurance products are governed by the terms in the applicable insurance policy.
