AAA GAP Insurance: What to Consider

When the value paid out by the insurance company on a total loss is less than what you owe on your car loan, GAP insurance covers this difference. You must be a member to qualify for AAA auto and GAP insurance coverage.

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Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently a professional writer.

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Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business. Brad is licensed in all P&C lines.

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Reviewed by Brad Larsen
Licensed Auto Insurance Agent Brad Larsen

UPDATED: Mar 28, 2022

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Things to Know

  • When your vehicle gets totaled, AAA GAP insurance covers the difference between the car’s depreciated value and the repair costs
  • You can purchase AAA GAP insurance at a flat rate of $299 at the time of vehicle purchase
  • You must be a member to qualify for AAA auto insurance, including GAP insurance

The process of shopping for car insurance policies can be long and tedious. We thought we’d try to narrow your search options by shedding light on some of them. This article will look at AAA GAP insurance and how it can be a vital addition to your pre-existing auto insurance policy.

Although car insurance can go a long way to cover you in many auto-related incidents, a single policy can’t cover everything. AAA’s GAP insurance policy can serve in the unfortunate situation that your vehicle gets totaled and you still owe on your car loan.

What is AAA’s GAP insurance policy?

You may be wondering: what is GAP car insurance? If your car gets totaled, GAP insurance — or Guaranteed Asset Protect insurance — covers the difference between what your insurance company pays you for your vehicle and what you still owe.

If you get into an accident and it costs more to repair your car than your car’s value, your insurance company will total the car and pay you the amount the car is worth.

If you owe more on the car than what it’s worth when it’s totaled, you will have to pay your lender the additional amount beyond what the insurance company pays out in order to settle the loan. GAP insurance pays that difference.

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What does GAP insurance cover?

Different car insurance companies may offer different GAP insurance benefits. AAA GAP insurance covers you when your car gets totaled and you owe more than it’s worth. A vehicle becomes totaled due to a:

  • Collision or crash
  • Theft or vandalism
  • Natural disaster

When you own more than what your car is worth, it’s called being “upside down”. It can happen fast when you buy a new car and don’t put enough money down on the loan. GAP insurance from AAA can protect you if you’re upside down when the vehicle is totaled by paying the difference between what you owe and what the insurance company is paid out.

Do I qualify for AAA’s GAP insurance coverage and do I need it?

AAA GAP insurance is only an option for AAA members with existing full coverage insurance policies. You must be a resident of Alaska, Arizona, Northern California, Nevada, Montana, Utah, or Wyoming to purchase AAA GAP insurance. Often, it’s a requirement to purchase GAP insurance when you lease a vehicle and a recommendation when:

Your vehicle down payment was less than 20%

Generally speaking, a new vehicle loses 20% of its value within the first year of ownership. Since depreciation continues beyond that point, you could find yourself upside down on your loan if your down payment wasn’t large enough at the time of purchase.

You’ve financed your car for 60 months or more

Although a long-term loan can lower your monthly payment, it can also put you in a challenging financial position. With a longer loan, you build equity in your vehicle more slowly than you would with a shorter term, but regardless, your car depreciates at the same rate.

You’ve purchased a vehicle that depreciates faster than average

Some vehicles tend to depreciate faster than others. For example, sedans lose their value quicker than SUVs or trucks. Choose a car with good resale value to save more money in the long term.

Negative equity from an old car rolls over into your new loan

Your new vehicle loan amount is higher due to the rollover loan amount from your previous vehicle. In this situation, it’s wise to extend your auto coverage with GAP insurance so you don’t end up upside-down if your car gets totaled.

AAA GAP insurance covers your totaled vehicle without affecting your credit score. A GAP insurance policy with AAA also comes with additional benefits such as free towing services and discounted travel packages.

How much does AAA GAP insurance cost, and what coverage do you get?

You can purchase AAA GAP insurance coverage for 5% of your annual car insurance rate when you qualify. You can add the purchase amount to your car loan or pay it directly to AAA in a lump sum. It’s crucial to remember that you can only purchase GAP insurance at your car loan’s origination.

GAP insurance will cover up to two past due car payments — if applicable — plus a $1000 deductible for $50,000.

AAA also offers a 60-day risk-free trial with the purchase of GAP insurance. If you choose to cancel coverage within that timeframe, AAA refunds your money at no penalty to you.

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GAP Insurance Benefit Activation

Following the vehicle incident, activating your AAA GAP insurance policy is relatively straightforward. Once your insurance company declares your vehicle totaled and receives all necessary paperwork, AAA will receive a settlement check.

AAA will apply your benefits and notify you that your loan has been paid in full if your auto loan is enrolled in GAP protection with no outstanding issues. If you choose to purchase or lease another vehicle, you will need to buy a new GAP insurance policy with loan initiation.

Is AAA GAP insurance worth it?

There are a few things to keep in mind when considering AAA GAP insurance:

  • Cost to purchase. GAP insurance usually costs 5% of your car’s annual premium cost.
  • Are you underwater on your loan? You owe more on your auto loan or lease than your car’s value.
  • Do you own a commonly targeted vehicle? Thieves often target your car’s make and model, and you’d like to extend your auto coverage.
  • Can you cover the excess on the loan? You know you cannot cover the loan if it car insurance doesn’t pay out the full amount owed.

It’s essential to look at your car’s value before purchasing GAP insurance. The price may fluctuate based on where you buy it. Traditional insurers, such as AAA, typically sell GAP insurance cheaper than most auto dealers. Shop around before purchasing your vehicle to find the best rate for you.

Other AAA Auto Insurance Options

You must be a AAA member to be eligible for AAA auto insurance. Some of the most common AAA car insurance policies include:

  • Liability. Liability helps pay for damages to another person’s car when the incident was your fault.
  • Collision. Collision helps cover costs to repair or replace your vehicle if you get into a crash.
  • Comprehensive. Comprehensive coverage helps pay for costs to repair or replace your car following a non-collision incident.
  • Uninsured and underinsured motorists. This coverage protects you if the other person’s insurance limits aren’t adequate to cover vehicle damages and personal injury.
  • Personal injury protection. Personal injury protection helps offset medical costs for you and your passengers.
  • Medical payments. This coverage helps cover the medical costs for you and your passengers after a collision.

There may also be additional AAA discounts, coverage options, and benefits available to you based on your location.

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The Bottom Line on AAA GAP Insurance

Your auto insurance policy covers several auto-related incidents that may occur. Unfortunately, no insurance policy can cover everything, and your auto insurance coverage is no exception. It’s important to consider other options for additional coverage so that you’re taken care of in tough times.

A AAA GAP insurance policy can give you the utmost confidence in your auto insurance policy. AAA GAP insurance is a robust, cost-effective add-on that will go a long way to provide you coverage if your vehicle gets totaled.

 

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