1. What is Gap Insurance?

Gap insurance covers the difference between what you owe on your car loan and the car's actual cash value if it's totaled or stolen. It's particularly valuable for new cars that depreciate quickly.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( Vehicle\ Price \) — The purchase price or current value of the vehicle
• \( Gap\ Rate \) — The insurance rate (typically 0.01 to 0.05 of vehicle price)

Explanation: The premium is calculated by multiplying the vehicle's value by the gap insurance rate provided by your insurer.

3. Importance of Gap Insurance

Details: Gap insurance protects you from financial loss when your car's depreciated value is less than your outstanding loan balance after an accident.

4. Using the Calculator

Tips: Enter the vehicle price in dollars and the gap rate as a decimal (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Who needs gap insurance?
A: It's most valuable for new car buyers, those with small down payments, or long loan terms (60+ months).

Q2: What's a typical gap insurance rate?
A: Rates typically range from 1% to 5% of the vehicle's value, depending on insurer and risk factors.

Q3: How long should I keep gap insurance?
A: Until your loan balance is less than your car's actual cash value, usually 2-3 years.

Q4: Does gap insurance cover my deductible?
A: Standard gap insurance doesn't cover deductibles, but some policies offer this as an add-on.

Q5: Can I get gap insurance from my lender?
A: Yes, but it's often cheaper through your auto insurance provider.