If you already carry full coverage on your car, you might be wondering if gap insurance is worth it. While full coverage insurance provides substantial protection, it doesn’t cover everything. Learn the difference between full coverage and gap insurance to determine if you need both.
Key Takeaways
- Gap insurance covers the difference between your car’s value and the amount you owe on your loan.
- Full coverage includes comprehensive and collision insurance but doesn’t cover loan gaps.
- If your car is financed or leased, having both gap insurance and full coverage could save you money if you face a total loss.
What Is Gap Insurance?
Gap insurance, or Guaranteed Asset Protection, covers the difference between your car’s actual cash value (ACV) and the amount you still owe on your auto loan or lease. If your car is stolen or declared a total loss after an accident, standard full coverage insurance will only pay for the current market value of your car. However, the payout might not be enough to cover your remaining loan balance. This is where gap insurance comes in—it helps pay off the remainder of your loan or lease, so you aren’t left paying for a car you can no longer drive.
What’s the Difference Between Full Coverage and Gap Insurance?
Unlike gap insurance, full coverage insurance typically includes three parts:
- Liability Insurance: Covers damage to others and their property if you’re found at fault for an accident.
- Collision Insurance: Covers repairs or replacement costs if your car is damaged in an accident.
- Comprehensive Insurance: Covers non-collision damage, like theft or weather-related incidents.
Full coverage offers extensive protection, but it doesn’t account for outstanding loan amounts if your car’s value is less than what you owe. In contrast, gap insurance bridges the difference so you won’t be left with unpaid debt should your car be declared a total loss.
Do I Need Gap Insurance If I Have Full Coverage?
Even with full coverage, gap insurance can provide extra financial protection, especially if you have a loan or lease. Here’s when gap insurance is most beneficial:
- You’re financing or leasing. If you’re paying off a car loan or leasing, the car’s value may depreciate faster than you can pay it off. This could result in you owing more than the car is worth.
- Your car’s value depreciates quickly. Your car’s value depreciates once you drive it off the lot, leaving a significant gap between what you owe on the car and its current market price.
- You have a small down payment or long-term loan. If it takes you longer to pay off your car, its value can drop faster than your loan balance, creating a gap between what you owe on the car and its worth.
If I Have Gap Insurance, Do I Need Full Coverage?
Gap insurance alone doesn’t cover all situations. It’s designed to complement, not replace, full coverage. Without full coverage, you aren’t protected against damages to your own vehicle. Here’s why full coverage is important:
- Collision and comprehensive protection: Gap insurance doesn’t cover repairs or replacement costs for your car in an accident. You’ll need collision and comprehensive coverage for those scenarios.
- Protecting your investment: Full coverage helps cover damage to your vehicle, regardless of fault, providing peace of mind for day-to-day driving.
Gap Insurance vs. Full Coverage: Do You Need Both?
When weighing gap insurance vs. full coverage, examine your financial situation and vehicle. If you’re leasing or financing, consider both full coverage and gap insurance. While full coverage addresses repair costs, gap insurance helps you avoid owing money on a car that’s been totaled.
Whether you decide to add gap insurance to your policy or stick with full coverage, The General is here to help. Get a free car insurance quote to find the best option for your needs and budget. With The General, you can drive confidently, knowing you’re covered.
