Yes, Allstate offers gap insurance for approximately $20 per six-month policy. Allstate gap insurance pays the difference between a totaled car’s value and the policyholder’s loan or lease balance, including the collision or comprehensive deductible up to $1,000.
Allstate gap insurance is usually a better investment than purchasing this coverage from a dealership, where the cost is often rolled into your loan and charged interest. And you can cancel Allstate gap insurance once your car is worth more than your loan or lease balance.
For more information, check out WalletHub’s complete guide to gap insurance.
Gap insurance is definitely worth the money if you owe more on your car loan or lease than the car is worth. For example, if you paid a small down payment on your car, your loan term is 4-5 years or your car will depreciate quickly, you should consider getting gap insurance. Gap insurance is never mandated by state law, and few lenders or lessors require it, so the decision to buy it depends on personal circumstances.… read full answer
Gap Insurance Is Worth It When:
You don’t have the savings to pay off your loan or lease if the car is totaled or stolen.
Your down payment is less than 20% of the car’s value.
Your loan will last four years or more.
You drive more miles than average, which reduces the car’s value faster.
Your car is a make and model that depreciates especially fast, like a luxury sedan or electric vehicle.
You are a single-car household and need a car to get around.
Your loan includes negative equity from your last car.
Since gap insurance covers the difference between the car’s actual cash value and the amount you owe, researching these two numbers will be a key deciding factor in whether gap insurance is worth it.
Why Getting Gap Insurance Is Worth It
For example, say you buy a car for $20,000 and your down payment is $2,000. This small down payment suggests that gap insurance might be worth it, but it’s still a good idea to check the car’s anticipated value after a year to determine if there will be a gap. If the car is worth $12,000 after a year but you’ll still owe $15,000, gap insurance could be a smart investment. If you don’t buy gap insurance and this car is totaled after a year, you’ll still owe $3,000 even though you can no longer drive it.
On the other hand, if your down payment is large enough or the car’s resale value is high enough that you’ll never owe more than the car is worth, gap insurance is unnecessary. Similarly, if you do owe more than the car is worth but you have the resources to pay the difference if the worst happens, it might be worth taking the risk.
Gap insurance is an optional type of car insurance coverage that pays the difference between the balance on a car loan or lease and what the vehicle is actually worth if it is declared a total loss. Gap insurance ensures you don't have to make payments on a car that is no longer drivable.… read full answer
Gap coverage usually only applies when a driver has comprehensive and collision insurance. Collision or comprehensive coverage will pay out the car’s value if it’s a total loss, and then gap insurance fills in the rest.
Gap Insurance Example
Imagine you buy a $50,000 car with a down payment of $10,000. Three years later, the car is worth $20,000, but you still owe $24,000 on the loan. If the car is totaled in an accident or stolen and declared a total loss, your normal insurance policy will pay $20,000, or the car’s actual cash value (ACV), minus your deductible.
New car price
Loan balance after one year (4% APR/5-year loan)
Actual cash value after one year
Insurance payment without gap coverage
Gap insurance payment
If you don’t have gap insurance, you’ll still owe $4,000, and you’ll still have to pay off the car even though you can’t drive it. But if you do have gap insurance, it will pay the $4,000. Some gap insurance policies even pay your deductible, though most do not.
It’s also important to keep in mind that the money you receive from gap insurance will go to your lender or lessor, not toward your purchase of a new car. If you’re interested in coverage that will help you buy a car in the future, look into new car replacement insurance instead.
Finally, you can buy gap insurance from a dealership, bank, credit union, or car insurance company. It’s not legally mandated in any state, though car dealerships will sometimes require it on a leased or financed vehicle. If you sell a car, pay it off early, or trade it in, you can usually receive a gap insurance refund.
To find out if you have gap insurance, you should check both your existing car insurance policy and the terms of your loan or lease. Drivers can get gap insurance through their insurance company as an add-on or separately through their auto lender, so it’s important for drivers to check both places.… read full answer
How To Know If You Have Gap Insurance
1. Check with your car insurance company.
You can look through records such as your recent bills, or you can log in to your account on the company’s website. If this fails, you should call to ask about your coverage.
2. Check with your auto lender.
If you didn’t buy gap insurance from your normal insurance company, you could have purchased it from the dealership, bank, or credit union that supplied you with a loan or lease. It can be easy to overlook gap insurance from one of these sources since it’s sometimes included in your contract automatically.
3. Check your financial documents.
If you do not have gap insurance through your dealership, lender, or car insurance company, you probably are not covered. But as a last resort, you can look through your financial records – such as your online bills, credit card statements, and checkbook – to try to find some clues.
Gap insurance, which covers the difference between your loan balance and the car’s actual value, can come from a dealership, bank, credit union, or car insurance company. It’s unlikely that you bought a stand-alone gap insurance policy without realizing it, so your first step should be to check with the obvious candidates.
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