Gap insurance is an important type of coverage that covers the financial gap that exists between the actual cash value of your car and the amount you owe to your lender in case your vehicle gets totaled or stolen.

In this post, we will talk about State Farm Gap Insurance, what it is, how it works, and why you might need it.

What is State Farm Gap Insurance?

State Farm Gap Insurance is a type of insurance policy that helps you pay for the difference between the actual cash value of your car and the amount you owe to your lender.

This coverage is essential because if your car gets totaled or stolen, your primary auto insurance policy will only pay for the actual cash value of your car, which may not be enough to pay off the balance on your loan or lease.

How does State Farm Gap Insurance work?

State Farm Gap Insurance works by covering the difference between the amount of money your primary auto insurance policy pays out and the amount you still owe on your car loan or lease. Here’s how it works:

Let’s say you bought a new car for $25,000, and you still owe $20,000 on it. If your car gets totaled or stolen, and your primary auto insurance policy pays out $18,000 (the actual cash value of your car), you would still owe $2,000 to your lender.

However, if you have State Farm Gap Insurance, it would cover the $2,000 difference, so you wouldn’t have to pay anything out of pocket.

Why do you need State Farm Gap Insurance?

There are several reasons why you might need State Farm Gap Insurance. Here are just a few:

1. You have a loan or lease on your car.

If you’re financing your car or leasing it, you’re probably making payments every month. If your car is totaled or stolen, and your primary auto insurance policy doesn’t cover the full cost of your outstanding loan or lease, you could be on the hook for thousands of dollars.

2. You bought a new car.

New cars depreciate quickly, which means that their actual cash value may be much lower than what you paid for them. If your car is totaled or stolen shortly after you buy it, your primary auto insurance policy may not cover the full cost of your loan or lease.

3. You don’t have a lot of savings.

If you don’t have a lot of money saved up, paying off your outstanding loan or lease after your car gets totaled or stolen could be a financial burden. Gap insurance can help ease that burden by covering the difference between what your primary auto insurance policy pays out and what you still owe.

How much does State Farm Gap Insurance cost?

The cost of State Farm Gap Insurance varies depending on several factors, including the type of car you have, the length of your loan or lease, and your driving history.

Generally, though, State Farm Gap Insurance costs around 5% to 6% of your total comprehensive and collision premium.

Conclusion

State Farm Gap Insurance is an essential type of coverage for anyone who has a loan or lease on their car.

It helps cover the difference between what your primary auto insurance policy pays out and what you still owe to your lender in case your car gets totaled or stolen.

The cost of State Farm Gap Insurance varies depending on several factors, but it’s generally around 5% to 6% of your total comprehensive and collision premium.

So if you’re financing or leasing a car, be sure to consider getting State Farm Gap Insurance to protect yourself financially in case the unexpected happens.