Gap Insurance in New York: Everything You Need To Know In 2024
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New vehicles typically depreciate by about 20% within the first year of ownership. If your car is totaled and you owe more on your loan than the car is worth, you may have to cover the deficit.
This is where gap coverage comes in handy for drivers in New York. To learn everything you need to know about gap insurance, read further.
Key Takeaways
This type of insurance protects you from owing more on your car than it’s worth in case of an accident or theft.
You can get coverage separately or as an extension of your car insurance policy.
Choosing gap insurance from your car insurance provider is a money-saving move.
What Is Gap Insurance?
Guaranteed Asset Protection (GAP) insurance simply covers the difference between your vehicle’s actual value and what you owe on it through a lease or loan. If your vehicle is totaled in an accident, your insurance typically reimburses you based on its current market value, which might be less than your remaining loan balance.
According to CCC, an insurance software company, 20% of vehicles have been declared total losses rather than repaired. With the average price of new vehicles hitting $48,759, it’s possible to owe more than your vehicle’s value, especially with a small initial payment.
Note: If repairing a vehicle costs more than its value, it is considered totaled. Insurance providers often use tools like Kelley Blue Book or NADA to determine the actual cash value of your vehicle.
How Much Does Gap Insurance Cost?
The average annual cost of gap insurance is $61 across the country, according to Forbes Advisor. In New York, prices range from $24 to $360 per year, depending on whether you purchase it from an insurance company or a dealership. It’s typically more cost-effective to buy directly from your insurer, despite state restrictions limiting dealership prices to 5% of the loan or lease amount.
Do I Need Gap Insurance In New York?
In New York, gap insurance isn’t legally required. New York law explicitly prohibits making gap insurance a condition for a lease or loan. Nevertheless, experts advise purchasing this coverage if you lease or finance a car, especially in certain scenarios.
It’s wise to add gap insurance to your auto policy if you lease or finance your car, as it’s usually quite affordable. However, if you’re on a tight budget, you could consider skipping it unless you fall into any of these categories:
- Your down payment is less than 20%.
- Your financing terms extend to 60 months or more.
- Your vehicle depreciates faster than average.
- You transferred a previous loan balance to your new car loan.
How Does Gap Insurance Work?
Here’s how gap insurance works in action: Imagine buying a $40,000 car, putting down $5,000, and financing the balance. Some years later, you get into an accident. If your car’s value is now $20,000 and you still owe $23,000, there’s a $3,000 difference. Without gap insurance, you’d pay this out of pocket. With gap insurance, your insurer would pay the $3,000.
Note: Gap insurance applies if you owe more on your car than its current value. Once your loan is paid off, the insurance won’t pay more than the car’s actual cash value.
Where Can I Find Gap Insurance In New York?
Gap insurance is available as a standalone purchase or an addition to your car insurance. It’s generally more economical to add it to your car insurance policy, which typically ranges from $40 to $60 annually, compared to standalone policies that can cost between $500 and $700.
Note: Dealerships often include gap insurance expenses in your loan, which can lead to increased costs over time, particularly with added interest. A better strategy is to integrate it into your car insurance policy and terminate the coverage once your loan is settled.
Gap Insurance VS Full Coverage
Gap insurance and full coverage both increase the potential reimbursements from your insurance provider, but they serve distinct purposes. Gap insurance covers the difference between your car’s actual cash value and the remaining balance on your lease or loan.
In contrast, full coverage includes comprehensive and collision coverage, which pay for damages caused by events like fire, theft, vandalism, and collisions with animals. Collision coverage specifically addresses repairs needed after your car collides with another vehicle or object.
| 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 |
How To Buy Gap Insurance In New York?
To secure gap insurance in New York, use these outlined steps.
Choose whether you prefer purchasing standalone gap insurance or integrating it into your existing car insurance, then compare the pricing for each option.
Search for a licensed company in New York that provides gap insurance. If you prefer, you can purchase this coverage separately from the dealership when signing your lease or loan.
If you’re planning to get gap insurance from your car insurer, give them a call to confirm they provide it.
Get insurance coverage for your leased or financed car.
Here are some licensed companies offering gap insurance in New York.
- Allstate
- Nationwide
- Progressive
- State Farm
- Travelers
- Liberty Mutual
FAQs
What does gap insurance cover in New York?
The role of gap insurance is to cover the difference between your car’s value after a loss and the balance remaining on your lease or loan. Without this coverage, you’d have to pay this amount from your own funds.
How much is Gap insurance in New York?
The amount New York residents pay for gap insurance is influenced by whether they purchase it as a separate policy or as an addition to their car insurance. Stand-alone policies generally range from $500 to $700 as a one-time fee, whereas insurers tend to charge between $40 and $60 annually when it’s part of an existing policy.
Do I need gap insurance if I have full coverage?
Most lenders will expect you to carry full coverage when you lease or finance your car. While gap insurance isn’t compulsory in these situations, it’s often suggested.
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