Estimated your potential out-of-pocket costs in the event of a total vehicle loss. This gap insurance cost calculator helps you determine if gap coverage is financially necessary by comparing your current loan balance against your car’s actual cash value (ACV).
Gap Insurance Cost Calculator
Gap Insurance Cost Calculator Formula
The cost of gap insurance typically ranges from 5% to 6% of your comprehensive and collision insurance premiums if purchased through an insurer. Dealerships often charge a flat fee between $400 and $700.
Source: Insurance Information Institute (III)Variables:
- Vehicle Purchase Price: The total amount paid for the car, including taxes.
- Current Loan Balance: The remaining amount owed to your lender.
- Months Owned: Used to calculate the vehicle’s Actual Cash Value (ACV) based on standard depreciation (approx. 20% in year 1, 15% thereafter).
What is Gap Insurance Cost Calculator?
A gap insurance cost calculator is a tool designed to help car owners determine if they are “underwater” on their auto loan. Being “underwater” or having “negative equity” means you owe more on your car loan than the car is currently worth.
If your car is totaled or stolen, standard insurance only pays the Actual Cash Value (ACV). Gap insurance covers the “gap” between that ACV and your remaining loan balance. This calculator estimates both the financial gap and the likely cost to insure it.
How to Calculate Gap Insurance Cost (Example)
- Determine ACV: If you bought a car for $30,000 and have owned it for 12 months, its value might have dropped by 20% ($24,000).
- Check Loan Balance: Suppose your remaining loan is $27,000.
- Identify the Gap: $27,000 (Loan) – $24,000 (ACV) = $3,000 Gap.
- Estimate Premium: If your comprehensive coverage is $800/year, Gap Insurance would cost roughly $40-$60 per year via an insurer.
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Frequently Asked Questions (FAQ)
Yes, if you put down less than 20%, have a loan term longer than 60 months, or are leasing the vehicle.
Most gap insurance policies do not cover your primary insurance deductible, though some specialty policies might.
Dealerships often charge a one-time flat fee ($500+) and may roll it into your loan, meaning you pay interest on it. Insurers usually charge a small annual fee.
You can usually cancel it once your loan balance is lower than the car’s market value.