Hyundai Gap Insurance: Everything You Need To Know
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Wrecking your car because of an accident or having it stolen are always stressful events. But things can even become worse if you owe more on your vehicle than what your insurance is willing to pay.
This is where gap insurance can help.
Today, we will talk about Hyundai gap insurance and everything you need to know about it. What exactly is gap insurance? How does it work? Is it worth getting it? These are just some of the questions we’ll answer below.
What Exactly is Hyundai Gap Insurance?
When your insured Hyundai car is totaled during an accident or got stolen and never recovered, your insurance provider may cover the current depreciated value of your car – aka actual cash value – by the time you file for a claim. Since cars quickly depreciate, the insurance settlement may not be enough to cover the amount you still owe on your loan or lease.
This situation potentially leaves you with a hefty bill to pay for a practically unusable car.
You can avoid this headache-inducing scenario by getting Hyundai gap insurance. Hyundai’s GAP stands for Guaranteed Asset Protection, and its optional insurance coverage is designed to bridge the difference between your primary insurance settlement and your auto loan balance.
Without the GAP coverage, you could have a shortfall of up to thousands of dollars, especially if your vehicle model doesn’t hold its value well. For Hyundai, you’re only required to get a collision and comprehensive coverage, and GAP is entirely optional.
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How Does Hyundai Gap Insurance Work?
To better illustrate how gap insurance works, let’s look at an example. DISCLAIMER: The amounts and figures below are for illustrative purposes only and don’t represent real-life values.
Say you bought a 2022 Hyundai Palisade with a sticker of $33,350. You made a 10% down payment which lowers the loan cost to $30,015. Let’s say you got a 5-year auto loan and got lucky with 0% APR (unlikely but for simplicity’s sake), so your monthly car payments come down to $500. After a year, you’ve put down $6,000, which brings down your loan balance to $24,015.
At this point, your car got wrecked or stolen, and the insurance wrote it off as a total loss. According to your insurance policy, you’re entitled to the current full value of the vehicle. Like your average car, let’s say the car has gone through 20% depreciation since you bought it. Now, the Palisade’s value is $26,680.
In this case, your collision coverage check ($26,680) will cover the entire loan balance, and you’ll have $2,665 to pay for a new car.
However, what if you had a car that doesn’t hold its value too well?
For example, your vehicle lost 30% of its value since buying it. In this case, you’ll be reimbursed by your insurance of $23,345, which isn’t enough to cover the remainder of the loan ($24,015). This scenario is called going upside down or underwater on your car loan – you owe more than what your vehicle is worth.
Therefore, you still owe your lender $670. The Hyundai gap insurance will cover this difference (or gap), so there’s no out-of-pocket cost for you.
Do I Need Hyundai Gap Insurance?
Gap insurance coverage can vary from one car manufacturer to the next. In the case of Hyundai, the Protection Plan GAP offers a few benefits:
- Waives some or all the difference in case of total loss
- Covers up to $1,000 of the customer’s insurance deductible (not available in all states)
- No amount limitations on covered losses waived
- No mileage limitations
- No loan-to-value ratio (LTV) limit
Do you need gap insurance? Below, we’ve outlined the top reasons why this coverage makes sense.
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Consider Gap Insurance If…
- You made a small to no down payment - With little to no down payment, you’ll likely be upside down immediately after driving out of the dealership. Modern cars tend to drop as much as 25% of their value in the first year alone.
- You chose a longer loan term - A longer loan term means it’ll also take you longer to build equity. Consider getting gap insurance if your loan duration is over 60 months.
- You’re buying a make and model that depreciates quickly - Not all cars are created equal, and they certainly don’t decline at the same rate. If you bought a car like this, gap insurance makes sense.
- You plan to drive a lot - In 2019, according to the Federal Highway Administration, the average American drove 14,263 miles per year in 2019. The more miles you put into your car, the faster it’ll depreciate. Thus, getting gap insurance is a smart move.
- You are leasing - Gap insurance usually comes with most lease agreements. In some cases, this extra coverage may be free or optional for added fees.
Remember, if you’re getting optional gap insurance, you don’t have to keep it permanently. With most policies, you may cancel it if you don’t need it anymore. However, it’s best to check with the dealership or insurance provider.
Skip Gap Insurance If…
- You made a sizable down payment of at least 20% on the vehicle by the time of purchase. With a larger down payment, it’s unlikely that you’ll go underwater on your loan.
- You chose a loan with a maximum term of five years or 60 months.
- You bought a vehicle make or model that has a history of holding its value better over time.
If you wish to keep track of your vehicle’s value, you should check out National Automobile Dealers Association (NADA) or Kelley Blue Book to have an idea of your car’s current value.
How Much is the Cost of Hyundai Gap Insurance?
The average cost of auto gap insurance is between $20 to $40 per year. As usual, the price will vary based on the car manufacturer, insurance laws, model and make of the car, etc.
Is it worth it?
If you think that you’ll owe more than your car’s actual value, a Hyundai gap insurance is definitely worth the small investment, considering how much you can save down the line.
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