Gap Insurance in Arkansas: Everything You Need To Know In 2024

New cars often lose about 20% of their value in the first year of ownership. If your car is totaled and the amount you owe on your loan is more than what your car is worth, you could end up paying the difference out of your own pocket.

This is where gap coverage becomes crucial for Arkansas drivers. To learn everything about gap insurance, continue reading.

According to a study by CCC, an insurance software firm, 20% of vehicles have been written off rather than repaired since 2018. Given the high average price of new vehicles—$48,759—it’s possible to end up owing more than your vehicle’s value, especially if you made a minimal down payment.

How Much Does Gap Insurance Cost?

Forbes Advisor reports that gap insurance costs an average of $61 per year nationwide. In Arkansas, prices range from $24 to $360 annually, depending on whether you purchase it from an insurer or a dealership. Buying directly from your insurer is often a more cost-effective choice.

Gap Insurance VS Full Coverage

Gap insurance and full coverage insurance offer expanded protections from your insurance company, yet they serve distinct purposes. Gap insurance bridges the gap between your vehicle’s actual cash value and the remaining loan or lease balance.

Conversely, full coverage includes comprehensive and collision coverage, handling expenses arising from incidents like fire, theft, vandalism, or animal collisions. Collision coverage specifically addresses repairs following car-to-car or car-to-object contact.

How Does Gap Insurance Work?

Let’s illustrate how gap insurance operates with this example: You buy a new car for $40,000, pay a $5,000 deposit, and finance the rest. Some years later, you get into an accident. If your car is valued at $20,000 and you still owe $23,000, there’s a $3,000 gap. Without gap insurance, you’d have to pay this out of pocket. With gap insurance, however, your insurer would cover the $3,000.

Where Can I Find Gap Insurance In Arkansas?

You can buy gap insurance on its own or add it to your car insurance. It’s usually cheaper to add it to your car insurance policy, which costs around $40 to $60 per year, compared to stand-alone plans that range from $500 to $700 as a one-time fee.

Here are a few companies approved to sell gap insurance in Arkansas.

• Allstate
• Nationwide
• Progressive
• State Farm
• Travelers
• Clearcover
• Mercury

Do I Need Gap Insurance In Arkansas?

Experts recommend purchasing this coverage if you lease or finance a car, especially in specific circumstances. It’s advisable to include gap insurance in your auto policy if you lease or finance your vehicle, as it’s usually quite affordable. However, those on a tight budget may choose to forgo it if none of the following situations apply:

• Your down payment is less than 20%.
• Your financing terms extend to 60 months or more.
• Your vehicle depreciates faster than average.
• You rolled over a previous loan balance onto your new car loan.