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How does American Family gap insurance work?
My family has always gotten car insurance through American Family. I’m about to finance a car and I figured I’d go through them, too. How does American Family gap insurance work?
Bonnie Stinson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
American Family gap insurance covers the gap between your totaled car’s value and the amount you still owe.
AmFam offers gap insurance as an add-on. It’s also called loan/lease payoff coverage. For between $5 and $15 per month, you can get this extra coverage for your leased or financed vehicle to protect your assets in the event of a total loss.
Here’s how it works.
If you finance a car at $35,000, it will immediately lose value because of depreciation. In six months, that new car may only be worth $30,000. However, you might still owe $32,000 due to your payment structure.
If your car gets totalled, your insurance company will pay you the
ACV (actual cash value)
of the car (lets assume it is $30,000) but you’ll still owe $2,000. Gap insurance covers that $2,000 gap. Otherwise, you’d have to pay that remaining balance out-of-pocket.
Be aware that you must also have
collision
and comprehensive coverage
to be eligible for gap insurance. Furthermore, your vehicle may need to be newer than two years old and this policy may need to be purchased at the same time you buy your vehicle.Ask your AmFam agent what you need to do—but remember, AmFam may not offer you the cheapest rates. Shop around first to make sure you aren’t overpaying!
View full answer
- Gregory R.
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