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 important for new cars that depreciate quickly.

2. How The Calculator Works

The calculator uses the simple formula:

Where:

• \( Vehicle\ Cost \) — The purchase price or current value of your vehicle in dollars
• \( Factor \) — The insurance factor provided by your insurer (typically between 0.01 and 0.05)

Explanation: The factor is determined by your insurance provider based on your risk profile, vehicle type, and coverage options.

3. Importance Of Gap Insurance

Details: Without gap insurance, you could owe thousands more than your car is worth after an accident. This coverage is crucial for those with low down payments or long loan terms.

4. Using The Calculator

Tips: Enter your vehicle's current value or purchase price in dollars and the factor provided by your insurance company. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Who needs gap insurance?
A: Anyone who owes more on their car loan than the car's current value, especially new car buyers or those with long-term loans.

Q2: What's a typical factor value?
A: Factors typically range from 0.01 to 0.05 (1% to 5% of vehicle value), but vary by provider and individual risk factors.

Q3: How is the factor determined?
A: Insurers consider your driving history, vehicle type, loan terms, and coverage amount when determining your factor.

Q4: When should I drop gap insurance?
A: Consider dropping it when your loan balance falls below your car's actual cash value, typically after 2-3 years.

Q5: Does gap insurance cover my deductible?
A: Standard gap insurance doesn't cover deductibles, but some policies offer deductible coverage as an add-on.