Gap Insurance In Georgia: Everything You Need To Know In 2024
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Typically, new cars depreciate by about 20% within the first year of purchase. If your car gets totaled and the remaining loan balance exceeds its value, you might have to cover the shortfall.
This is where gap coverage comes into play for Georgia drivers. Despite my extensive experience selling insurance, many customers remain unsure about its workings. For a comprehensive explanation of gap insurance, continue reading.
Key Takeaways
Gap insurance ensures you won’t be left paying off a car loan if your vehicle is totaled and its value doesn’t cover the debt.
You can purchase coverage alone or as an addition to your vehicle insurance policy.
Getting gap insurance through your car insurance provider is a cost-effective decision.
What Is Gap Insurance?
To put it plainly, Guaranteed Asset Protection (GAP) insurance covers the gap between your vehicle’s actual value and what you owe on it through a lease or loan. In the event of a total loss accident, your insurance typically pays out based on your car’s current market value, which may be less than your outstanding loan balance.
According to a study by CCC, an insurance software company, 20% of vehicles have been totaled rather than repaired since 2018. With the average price of new vehicles reaching $48,759, it’s possible to end up owing more than your vehicle’s value, especially if your initial down payment was low.
Note: When the cost of repairing a vehicle exceeds its value, it’s considered totaled. Insurers typically rely on tools such as Kelley Blue Book or NADA to determine your car’s actual cash worth.
Do I Need Gap Insurance In Georgia?
Gap insurance isn’t mandatory according to Georgia law. In fact, Georgia law explicitly prohibits requiring gap insurance for leases or loans. Despite this, experts recommend buying this coverage if you’re leasing or financing a car, especially in specific circumstances.
It’s advisable to include gap insurance in your auto policy if you’re leasing or financing your vehicle, as it’s typically inexpensive. However, for those watching their budget, skipping it might be an option if none of these apply:
- Your down payment is less than 20%.
- Your financing terms exceed 60 months.
- Your vehicle depreciates faster than average.
- You rolled over a previous loan balance onto your new car loan.
How Much Does Gap Insurance Cost?
According to Forbes Advisor, the typical cost of gap insurance is $61 per year nationwide. In Georgia, prices vary from $24 to $360 annually, depending on whether you buy it from an insurer or a dealership. Purchasing directly from your insurance company is often more cost-effective, despite state regulations limiting dealership prices to 5% of the loan or lease amount.
How Does Gap Insurance Work?
Here’s a scenario to explain gap insurance: You purchase a $40,000 car, make a $5,000 deposit, and finance the remainder. After some years, there’s an accident. If your car’s worth is $20,000 and you still owe $23,000, there’s a $3,000 gap. Without gap insurance, you’d need to pay this amount. However, with gap insurance, your insurer would pay the $3,000.
Attention: Gap insurance is used when your car’s loan balance is greater than its actual value. After your loan is fully repaid, the insurance won’t pay more than the car’s current cash value.
Where Can I Find Gap Insurance In Georgia?
Gap insurance can be acquired either independently or as an extension to your car insurance policy. Choosing the latter option is more cost-effective, typically amounting to $40-$60 annually, whereas standalone policies may range from $500 to $700.
Note: Many dealerships will include gap insurance costs in your loan, which could mean paying more in the long term, especially with interest charges. It’s more prudent to incorporate it into your car insurance policy and discontinue coverage once the loan is repaid.
Gap Insurance VS Full Coverage
Gap insurance and full coverage extend the range of compensation offered by your insurance company, but they fulfill distinct purposes. Gap insurance addresses the disparity between your vehicle’s actual cash value and the outstanding balance on your lease or loan.
Conversely, full coverage encompasses comprehensive and collision coverage, which cover expenses arising from events like fire, theft, vandalism, and collisions with animals. Collision coverage specifically deals with repairs following collisions with other vehicles or objects.
| Gap Coverage | Full Coverage | |
| Applicable When the Car is Financed/Leased? | Yes | Yes |
| Required? | No | Yes, if the vehicle is financed/leased |
| Cost? | $61 per year | $2,542 per year |
| Deductible Apply? | Yes | Yes |
Find Affordable Gap Insurance In Georgia
How To Buy Gap Insurance In Georgia?
In Georgia, purchasing gap insurance involves following these steps.
Decide whether to opt for standalone gap coverage or include it in your car insurance policy, and then compare the prices for both alternatives.
Locate a reputable Georgia company that is authorized to sell gap insurance. You may also choose to buy this coverage directly from the dealership at the time of signing your lease or loan documents.
When deciding on gap insurance from your auto insurance, call your insurer to see if they offer this coverage.
Add insurance to your leased or financed auto.
These are some companies licensed to offer gap insurance within Georgia.
- Allstate
- AAA
- Progressive
- State Farm
- Travelers
- Auto-Owners
- GEICO
FAQs
What does gap insurance cover in Georgia?
Gap insurance fills the financial gap between your car’s value post-loss and the remaining amount on your lease or loan. Without it, you’d have to cover this shortfall out of pocket.
How much is Gap insurance in Georgia?
The cost of gap insurance in Georgia hinges on whether you opt for a separate policy or add it to your car insurance. Standalone policies usually come with a flat fee of $500 to $700, whereas insurers commonly charge between $40 and $60 annually when incorporated into an existing policy.
Do I need gap insurance if I have full coverage?
When you lease or finance a car, most lenders will require full coverage. While gap insurance isn’t obligatory in these scenarios, it’s often advised.
