USAA Gap Insurance: Bridging the Financial Gap Between Your Car’s Value and Loan Balance
If you’ve recently purchased a brand-new car, you may have heard of gap insurance. Gap insurance, also known as Guaranteed Asset Protection (GAP), is an additional insurance coverage that helps you pay off the difference between the actual cash value (ACV) of your car and the amount owed on your car loan or lease in the event of a total loss. It isn’t required by law, but can be a great financial safeguard for new car owners.
USAA gap insurance is one of the most popular GAP insurance options in the market. As a trusted provider of insurance and financial services, USAA offers a wide range of products, including its gap insurance policy. In this article, we’ll take a closer look at what gap insurance is, how it works, and the benefits of opting for USAA’s gap insurance policy.
What is gap insurance?
Gap insurance is an optional insurance policy that provides financial protection for new car owners in the event of a total loss. A total loss can occur if your car is stolen or damaged beyond repair, and your insurance company declares that the cost of repairing your car is more than its worth.
When you purchase a new car, it instantly loses value once you drive it off the dealer’s lot. That means, if you get in an accident and your car is deemed a total loss, you may find yourself owing more on your car loan or lease than the car is worth at that point in time. The amount your car is worth after depreciation is known as the actual cash value (ACV). Gap insurance will help you bridge that gap between your car’s ACV and what you still owe on your loan or lease.
How does USAA gap insurance work?
USAA gap insurance is designed to help cover the difference between your car’s ACV and the amount you owe on your loan or lease. Let’s examine how USAA gap insurance works using an example:
Scenario 1: Total Loss
Suppose you purchased a car for $40,000 with a car loan that has a balance of $35,000. After a year of ownership, your car is totaled due to an accident, and its ACV is $30,000. Here’s how USAA gap insurance can help in this scenario:
– Your auto insurance company will determine the actual cash value of your car, which is $30,000 in this case.
– They will pay you $30,000 as well as any applicable deductible.
– USAA gap insurance will pay the difference between the ACV and the amount you still owe on your loan or lease. In this case, they will pay $5,000 to your lender to pay off the remaining loan balance.
Scenario 2: Theft
Imagine you purchased a car for $30,000 with a loan balance of $25,000. Two years into the ownership of the car, someone steals it, and it’s never recovered. In this scenario:
– Your auto insurance company will investigate the theft and make a determination that the car is unrecoverable.
– They will pay you back the ACV of the car, which is $20,000. This is the amount you would receive without gap insurance coverage.
– USAA gap insurance will pay the difference between the ACV and the amount you still owe on your loan or lease. In this case, they will pay $5,000 to your lender to pay off the remaining loan balance.
What are the benefits of USAA gap insurance?
1. Affordable rates
Unlike other insurance companies, USAA offers affordable rates for gap insurance coverage. USAA gap insurance rates are generally lower than what you’d find elsewhere in the market. This is because USAA members are considered low-risk drivers. In other words, they are less likely to get into accidents or file claims, which means they’re less of a risk to insure.
2. Coverage for both leased and financed cars
USAA gap insurance provides coverage for both leased and financed cars. Regardless of how you’re financing your car, USAA gap insurance can help you cover the gap between the ACV of your car and what you owe on the loan or lease. This is especially important if you’re leasing a car, as many lease agreements require you to purchase gap insurance.
3. Coverage for any type of car
USAA gap insurance provides coverage for all types of cars, whether it’s a brand-new luxury car, a used car or even an RV. Whether it’s a personal or commercial vehicle, USAA gap insurance can be a great financial safeguard.
4. Peace of mind
Car accidents can come at any time and can be incredibly stressful. With USAA gap insurance, you can have peace of mind knowing that you’re financially protected in the event of a total loss or theft. You won’t have to worry about owing more on your car loan or lease than your car is worth.
How to get USAA gap insurance
Getting USAA gap insurance is a straightforward process. To get started, you’ll need to become a USAA member. Membership is open to:
– Active, retired and honorably separated officers and enlisted personnel of the U.S. military
– National Guard and Reserve members
– Officer candidates in commissioning programs (Academy, ROTC, OCS/OTS)
– Surviving spouses and immediate family of U.S. military members who died in service or of a service-related disability
– USAA members can get gap insurance coverage by logging into their account or by calling USAA at 800-531-8722. If you’re a USAA member but don’t have gap insurance yet, you can simply add it to your current policy.
How much does USAA gap insurance cost?
USAA gap insurance rates vary. Factors that influence how much you pay include the value of your car, the type of car you have, and where you live. Generally, USAA gap insurance costs anywhere from $40 to $180 per year. On average, you can expect to pay around $60 per year for USAA gap insurance coverage. However, this is significantly lower than what you could pay for similar GAP insurance policies at other providers.
Is USAA gap insurance worth it?
Gap insurance is not mandatory, but it can be a wise financial decision for people who purchase a new car with a loan or lease. If your car is totaled or stolen, USAA gap insurance can help you avoid negative equity on your loan or lease. This can save you thousands of dollars in the long run.
That being said, if you have a used car or have paid off your car loan or lease, gap insurance may not be as necessary. It’s important to understand your individual needs and financial situation before deciding to purchase gap insurance.
Conclusion
In summary, USAA gap insurance is an affordable way to bridge the financial gap between what you owe on your car and its actual cash value. USAA offers competitive rates and coverage for all types of cars, making it a great option for USAA members. Whether you own a new car, a used car, or an RV, USAA gap insurance can provide you with peace of mind in the event of a total loss or theft.
