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Gap Coverage Formula:
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Gap coverage is an optional auto insurance that pays the difference between what you owe on your car loan or lease and the car's actual cash value (ACV) if it's totaled or stolen.
The gap coverage calculation uses a simple formula:
Where:
Explanation: If your vehicle is declared a total loss, standard insurance typically pays only the ACV, which may be less than what you owe on your loan. Gap coverage bridges this financial gap.
Details: California drivers should consider gap coverage because vehicles depreciate quickly, and many drivers have long-term loans with small down payments, creating significant gaps between loan balances and vehicle values.
Tips: Enter your current auto loan balance and your vehicle's estimated actual cash value. Both values should be in USD. The calculator will show you the potential gap amount you might need to cover.
Q1: Who needs gap coverage in California?
A: California drivers who have financed or leased a new vehicle, made a small down payment, or have a loan term longer than 60 months should consider gap coverage.
Q2: How much does gap coverage cost in California?
A: Typically $20-$40 per year when added to your comprehensive auto insurance policy, though prices vary by insurer and vehicle type.
Q3: Is gap coverage required by law in California?
A: No, gap coverage is optional in California, but many lenders require it for financed vehicles.
Q4: Does gap coverage cover my deductible?
A: Most gap policies do not cover your comprehensive or collision deductible. You would still be responsible for paying your deductible amount.
Q5: When should I cancel gap coverage?
A: You can typically cancel gap coverage once your loan balance is less than your vehicle's actual cash value, which usually occurs in the later years of your loan.