Where To Find Gap Insurance in California For 2024
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Most new cars depreciate by roughly 20% within the first year of purchase. If your car is totaled and you owe more on your loan than the car’s current value, you may have to cover the deficit yourself. Gap coverage is designed to address this issue for drivers in California.
Many customers still struggle to understand how gap coverage functions. To gain a comprehensive understanding of gap insurance, read further.
Key Takeaways
Gap insurance steps in to cover the disparity between what you owe on your vehicle and its current market value.
You have the option to purchase coverage independently or as part of your car insurance.
Opting for gap coverage from your vehicle insurance firm is a cheaper option.
What Is Gap Insurance?
Guaranteed Asset Protection (GAP) insurance, in essence, covers the shortfall between what your vehicle is worth and what you owe on it through a lease or loan. If your car is totaled in an accident, your insurance typically only compensates you for its current market value, which may be less than your outstanding debt.
CCC, an insurance software company, conducted a study revealing that 20% of vehicles have been declared total losses rather than repaired. With the average price of new vehicles reaching $48,759, there’s a significant risk of owing more than your vehicle’s worth, particularly if your initial down payment was minimal.
Note: If the cost of repairing a vehicle exceeds its market worth, it is classified as totaled. Insurers frequently refer to Kelley Blue Book or NADA to determine the vehicle’s actual cash value.
Gap Insurance VS Full Coverage
Gap insurance and full coverage insurance both extend the potential coverage you receive from your insurer, but they fulfill different roles. Gap insurance covers the disparity between your car’s actual cash value and the amount left on your loan or lease.
In contrast, full coverage encompasses comprehensive and collision coverage, which pay for damages caused by incidents such as fire, theft, vandalism, and collisions with animals. Collision coverage specifically addresses 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?
According to Forbes Advisor, the average annual cost of gap insurance nationwide is $61. In Texas, prices range from $24 to $360 per year, depending on whether you buy it from an insurance company or a dealership. Opting for insurance directly from your insurer is generally more economical, despite state regulations capping dealership prices at 5% of the loan or lease amount.
How Does Gap Insurance Work?
Here’s how gap insurance functions in practice: Imagine buying a new $40,000 car, putting down $5,000, and financing the remainder. After a few years, an accident occurs. If your car is now valued at $20,000 but you still owe $23,000, you face a $3,000 shortfall. Without gap insurance, you’d have to pay this amount yourself. With gap insurance, your insurer would cover the $3,000.
Important: Gap insurance comes into play if your car’s loan balance exceeds its appraised value. After your loan is fully paid off, the insurance won’t exceed the vehicle’s actual cash value.
Where Can I Find Gap Insurance In California?
Gap insurance can be bought independently or as an extension to your car insurance policy. Opting for the latter is more economical, typically costing between $40 and $60 per year, whereas stand-alone plans can set you back $500 to $700 upfront.
Note: Many car dealerships may include the expense of gap insurance in your loan, which can end up costing you significantly more in the long run, especially with interest factored in. A better alternative is to incorporate it into your car insurance policy and remove the coverage once your loan is settled.
This list comprises companies authorized to sell gap insurance within California.
- Allstate
- Nationwide
- Progressive
- State Farm
- Travelers
- Clearcover
- Mercury
Do I Need Gap Insurance In California?
California doesn’t mandate gap insurance. In fact, state law prohibits requiring gap insurance for leases or loans. Still, experts advise buying this coverage if you lease or finance a car, especially in specific cases.
It’s recommended to add gap insurance to your auto policy if you’re leasing or financing your vehicle, given its affordability. However, if you’re trying to save money, you could consider skipping it if you don’t meet any of these criteria:
- You made a down payment of less than 20%.
- Your financing terms are 60 months or longer.
- Your vehicle depreciates faster than average.
- You transferred a previous loan balance to your new car loan.
How To Buy Gap Insurance In California?
Follow these steps to get gap insurance in California.
Make a decision on whether to get gap insurance on its own or include it with your car insurance, and then compare the prices of both choices.
Find a reputable California company licensed to offer gap insurance. You can also consider purchasing this coverage independently from the dealership when finalizing your lease or loan paperwork.
Before opting for gap insurance from your vehicle insurer, reach out to them to verify its availability.
Add insurance protection to your leased or financed automobile.
FAQs
What does gap insurance cover in California?
Gap insurance bridges the gap between your car’s value at the time of loss and the remaining loan or lease balance. Without it, you’d be responsible for paying this difference.
How much is Gap insurance in California?
In California, the expense of gap insurance depends on whether you choose a standalone policy or add it to your auto insurance. Typically, standalone plans cost a flat rate of $500 to $700, while insurers charge around $40 to $60 annually when included in an existing policy.
Do I need gap insurance if I have full coverage?
If you lease or finance your car, most lenders will expect you to have full coverage. While gap insurance isn’t obligatory in these cases, it’s often recommended.
Sources
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