Where To Find Gap Insurance in Arkansas 2024
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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.
Key Takeaways
If your car’s value is less than what you owe on your lease or loan, gap insurance fills that financial gap.
Coverage can be bought on its own or included in your car insurance plan.
It’s financially savvy to get gap insurance directly from your car insurer.
What Is Gap Insurance?
In plain terms, Guaranteed Asset Protection (GAP) insurance bridges the financial gap between your vehicle’s actual value and the amount you owe on it through a lease or loan. When your car is declared a total loss in an accident, your insurance typically covers only its current market value, which might be less than your outstanding debt.
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.
Note: When the cost of repairs exceeds its value, a vehicle is deemed totaled. Auto insurance companies commonly use Kelley Blue Book or NADA to establish the true cash value of your car.
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.
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 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.
Please note: Gap insurance kicks in when your car’s loan amount surpasses its value. After you’ve fully repaid your auto loan, the insurance won’t cover more than what the car is worth.
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.
Note: It’s common for dealerships to wrap gap insurance expenses into your loan amount, leading to higher long-term costs, especially with added interest. Opting to bundle it with your car insurance and canceling it after loan repayment is a more cost-effective strategy.
How To Buy Gap Insurance In Arkansas?
In Arkansas, to acquire gap insurance, these steps should guide you.
Choose between purchasing standalone gap coverage or adding it to your current auto insurance, then compare costs for each option.
Locate a reliable firm licensed to sell gap insurance in Arkansas. If you choose to buy this coverage separately from the dealership during the signing of your lease or loan agreement, it’s usually an option.
When considering gap insurance from your car insurance provider, give them a call to check if they provide this option.
Ensure your leased or financed car has insurance coverage.
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.
FAQs
What does gap insurance cover in Arkansas?
If you have gap insurance, it covers the disparity between your car’s value when it’s lost and the outstanding balance on your lease or loan. Without this protection, you’d have to foot the bill yourself.
How much is Gap insurance in Arkansas?
The price of gap insurance in Arkansas hinges on whether you opt for a separate policy or include it in your car insurance. Stand-alone plans usually incur a flat rate of $500 to $700, whereas insurers commonly levy between $40 and $60 per year 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 insist on full coverage. While gap insurance isn’t required in these situations, it’s typically suggested.
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