Gap Insurance in North Carolina: Everything You Need To Know In 2024
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On average, new cars lose about 20% of their value in the first year of ownership. If your car is totaled and you owe more on your loan than the car’s current value, you could face out-of-pocket expenses to cover the difference.
This is where gap coverage becomes beneficial for North Carolina drivers. Despite my extensive experience in insurance sales, many clients lack a complete understanding of how gap insurance operates. To gain a thorough understanding of gap insurance, continue reading.
Key Takeaways
If your car’s value depreciates faster than your loan balance, gap insurance covers the difference.
You have the option to buy coverage alone or as an attachment to your car insurance.
Purchasing gap coverage via your auto insurance company is a cost-efficient strategy.
What Is Gap Insurance?
Guaranteed Asset Protection (GAP) insurance, put plainly, covers the difference between your vehicle’s actual worth and what you owe on it through a lease or loan. If your vehicle is totaled in an accident, your insurance typically only reimburses you for its current market value, which could be less than your outstanding debt.
CCC, an insurance software company, conducted a study that found 20% of vehicles have been totaled rather than repaired since 2018. Given the average price of new vehicles in 2023 was $48,759, it’s entirely possible to end up owing more than your vehicle’s value, especially if you didn’t make a substantial down payment.
Note: When the expense of fixing a vehicle exceeds its value, it is totaled. Insurers frequently use resources such as Kelley Blue Book or NADA to establish the vehicle’s true cash value.
Gap Insurance VS Full Coverage
Gap insurance and full coverage insurance both expand the possible reimbursements from your insurance company, although they are designed for different purposes. Gap insurance covers the difference between your car’s actual cash value and the amount remaining on your lease or loan.
In contrast, full coverage includes comprehensive and collision coverage, which pay for damages from incidents like fire, theft, vandalism, and collisions with animals. Collision coverage specifically pays for repairs needed after your vehicle 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 Much Does Gap Insurance Cost?
Forbes Advisor states that the national average for gap insurance is $61 per year. In North Carolina, prices vary from $24 to $360 annually, depending on whether you buy from an insurer or a dealership. Buying directly from your insurer is often the more affordable choice, despite regulations in Texas that cap dealership prices at 5% of the loan or lease amount.
How Does Gap Insurance Work?
To illustrate how gap insurance operates, imagine this scenario: You purchase a $40,000 car, make a $5,000 down payment, and finance the rest. After some years, you’re in an accident. If your car is now worth $20,000 and you owe $23,000, there’s a $3,000 gap. Without gap insurance, you’d have to cover this amount. With gap insurance, your insurer would cover the $3,000.
Important to know: Gap insurance covers cases where your car’s loan exceeds its market value. After your loan is paid in full, the insurance won’t exceed the car’s actual cash value.
Where Can I Find Gap Insurance In North Carolina?
You can purchase gap insurance on its own or include it in your auto insurance policy. Including it in your car insurance is often more cost-effective, with annual costs ranging from $40 to $60, while standalone policies may require a flat fee of $500 to $700.
Note: Many dealerships may include the cost of gap insurance in your loan, which could prove more expensive in the long run, especially considering interest. A smarter choice is to add it to your car insurance policy and cancel it once your loan is paid off.
The subsequent companies are licensed to offer gap insurance in North Carolina.
- Allstate
- Nationwide
- Progressive
- State Farm
- Travelers
- Liberty Mutual
How To Buy Gap Insurance In North Carolina?
Follow these steps precisely to secure gap insurance in North Carolina.
Decide if you want to purchase gap coverage independently or through your auto insurer, and then assess the pricing for both scenarios.
Identify a reliable North Carolina-based company authorized to sell gap insurance. You can also choose to purchase this coverage directly from the dealership when you sign your lease or loan papers.
Before obtaining gap insurance through your auto insurer, call them to make sure it’s available.
Protect your leased or financed vehicle with insurance.
Do I Need Gap Insurance In North Carolina?
Gap insurance isn’t mandatory under North Carolina law. Specifically, North Carolina law prohibits making gap insurance a requirement for leases or loans. Despite this, experts recommend purchasing this coverage if you lease or finance your car, especially in certain situations.
It’s advisable to add gap insurance to your auto policy if you lease or finance your car, as it’s generally affordable. However, for those looking to save money, skipping the coverage might be an option if you don’t meet any of these criteria:
- Your down payment is less than 20%.
- Your financing terms are 60 months or longer.
- Your vehicle depreciates faster than average.
- You rolled over a previous loan balance onto your new car loan.
FAQs
What does gap insurance cover in North Carolina?
Gap insurance ensures that the difference between your car’s value at the time of loss and the outstanding amount on your lease or loan is covered. Without it, you’d be responsible for paying this difference.
How much is Gap insurance in North Carolina?
In North Carolina, the cost of gap insurance varies depending on whether you buy it separately or include it in your auto policy. Stand-alone plans typically have a flat fee of $500 to $700, while insurers charge between $40 and $60 annually when added to 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. Though gap insurance isn’t always required in these cases, it’s generally recommended.
