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Monthly Gap Insurance Formula:
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Gap insurance covers the difference between what you owe on your vehicle and its actual cash value if it's totaled or stolen. It's particularly valuable for new cars that depreciate quickly.
The calculator uses a simple formula to convert annual gap insurance premium to monthly:
Explanation: This divides your annual gap insurance cost into 12 equal monthly payments.
Details: Gap insurance protects you from financial loss when your car's value drops faster than your loan balance decreases, which is common in the first few years of ownership.
Tips: Enter your total annual gap insurance premium in dollars. The calculator will show your equivalent monthly payment amount.
Q1: Who needs gap insurance?
A: Those who financed a new car with less than 20% down payment, have long loan terms (60+ months), or lease their vehicle.
Q2: How much does gap insurance typically cost?
A: Annual premiums typically range from $200-$500, adding $20-$40 to monthly payments when financed.
Q3: Is monthly gap insurance more expensive?
A: Some insurers charge slightly more for monthly payments versus paying annually upfront.
Q4: When can I cancel gap insurance?
A: You can typically cancel when your loan balance is less than your car's actual cash value.
Q5: Does gap insurance cover my deductible?
A: Standard gap insurance doesn't cover deductibles, but some enhanced policies might.