Can you buy gap insurance at any time?

Gap insurance is worth the money whenever 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. ... read full answer

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.

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 costs around $3 per month when you add the coverage to your car insurance policy. When you purchase coverage from a car dealership instead, a gap insurance policy will cost a total of $400 to $700 in most cases.

A gap insurance policy covers the difference between what a leased or financed car is worth and how much the driver owes Like any other type of insurance, the cost of gap insurance varies depending on the car’s value and the driver’s risk characteristics, such as age and claims history.... read full answer

How to Get Cheap Gap Insurance

Some car leases include gap insurance at no added cost. But besides this free coverage, buying gap insurance from your normal car insurance company is usually the cheapest option. On average, gap insurance will only add around 5% to 6% to your comprehensive and collision cost. But since gap insurance is a relatively uncommon kind of coverage, not every insurance company offers it.

If your insurer does not provide gap insurance, it’s a good idea to compare quotes and see if it would be worth switching companies. If not, some companies offer standalone gap insurance policies. Also, if you are financing a car through a bank or credit union, these institutions will usually offer gap insurance upfront for anywhere from $200 to $700.

How Much Is Gap Insurance from a Dealer?

Dealerships are often the most expensive source of gap insurance, costing around $400 to $700 up front. If you are buying gap insurance that is rolled into your loan, bear in mind that you will be paying interest on the gap insurance premium as well as the rest of the loan’s balance. As a result, you’ll actually end up paying more than the original cost. This also comes into play wherever else you might get auto financing and gap insurance at the same time, including banks and credit unions.

However, price is not the only factor that should affect your decision of where to buy gap insurance. You should also consider how long your gap coverage will last and how long you will need it. Similarly, some gap insurance policies will pay your deductible, although many will not. And most gap insurance policies do not pay for anything you owe from a previous car loan.

You can get a gap insurance refund for unused premiums if you paid for coverage up front and then canceled it early. If you are cancelling within 30 days after the policy’s start date, you might be able to get a full refund, minus any cancellation fees. In other cases, only a partial refund may be possible. The details will depend on your policy and your state’s laws.... read full answer

When You Can Get a Gap Insurance Refund

• You are paying off, selling, or trading in the covered car.
• You are switching to a different gap insurance company.
• Your loan balance is no longer more than the car’s actual value, though it’s best to leave a cushion of $1,000-$2,000.

If you need a gap insurance refund because you’re selling or trading in the car, be sure to wait until the car no longer legally belongs to you before canceling your gap insurance. Then, you will need to give the appropriate paperwork to your insurance provider, such as proof of sale or auto payoff letter.

Some gap insurance companies might also require an odometer verification showing the mileage on your car, which you can get from a dealership before you sell or trade in the vehicle.

Similarly, if you’re refinancing, wait to cancel your gap insurance until your previous loan is no longer in effect.

When You Cannot Get a Gap Insurance Refund

On the other hand, drivers cannot get a gap insurance refund if the insured car is declared a total loss before the policy’s expiration date. In this case, the gap insurance will pay for the difference between the car’s value and the loan balance, but drivers will not be eligible for a refund for the remaining months of coverage.

How Long Does It Take to Get a Gap Insurance Refund?

Gap insurance refunds usually take 4-6 weeks. Staying in contact with your gap insurance provider and promptly returning signed paperwork can expedite the process, though.