What does gap insurance cover?
The fundamental idea of gap insurance is simple enough to comprehend, but what precisely does it cover?
Although gap insurance coverage is extremely flexible, you should be aware that it only protects your car from damage, not other property losses or accidents-related injuries to others. Here are some typical queries about gap insurance coverage.
What is Gap Insurance Coverage?
Gap Coverage (gap insurance coverage) pays the difference if you have a loan on your car and the balance is more than the actual cash value (what the car is worth right now).
When you buy a new car, usually the value begins to decrease as soon as you drive it for the first time. However, the loan balance does not. When you owe more on your car loan than it is now worth and it is totaled or stolen, gap insurance covers the difference to keep you from going bankrupt (which is what basic auto insurance covers).
Your gap insurance will pay the difference between what you still owe on the car and its current value. If you find yourself in this circumstance, the cost difference can be significant. You can save money by using Gap Coverage to cover the difference.
Does gap insurance cover theft?
In the event that your car is stolen and not found, theft may be covered by gap insurance.
Does gap insurance pay for the deductible expenses?
No. You would still be responsible for your deductible even in the case of an accident covered by your gap insurance policy. In other words, your total reimbursement would be $3,500 if the “gap” reimbursement amount is $4,000 and your deductible is $500.
Is engine failure covered by gap insurance?
No. Mechanical repairs are not covered by gap insurance; it is only used in the event of a total loss from a covered accident.
Is death covered by gap insurance?
No. Only car losses are covered by gap insurance; it does not pay for personal injuries, medical bills, missed wages, or funeral expenses.
Coverage for negative equity under gap insurance?
Yes. The difference between your loan balance and the car’s market value is known as negative equity.
Example of gap insurance
Consider the scenario when you are deemed to be not at fault for an accident that is covered. Your car is beyond repair, and a replacement is required. You are “under water” or “upside down” on your loan if you still owe $15,000 on your vehicle loan even though your car’s ACV is just $11,000. If you have gap insurance, it can help you pay the $4,000 difference between your loan balance and the value of your automobile after your deductible. Not all motorists require gap insurance. Finding out if gap insurance is appropriate for you is important if you are leasing or paying off a car.
How Much Is Gap Insurance Cover?
If your financed vehicle is totaled and you owe more than the vehicle is worth, gap insurance may pay the balance of your loan.
Gap insurance kicks in if your automobile is financed and you file a total loss claim, either after it is totaled (in which case the cost of repairs would exceed the value of the car) or if it is stolen. Your insurance will only cover a maximum of your car’s real cash worth when you file a complete loss claim (ACV).
Your outstanding car payments may, in some circumstances, be greater than your vehicle’s ACV. This is referred to as having negative equity or being in over your head with your loan. Gap insurance, also known as loan/lease payback insurance, aids in the repayment of the debt in this scenario. Just because your car is totaled, keep in mind that the loan still exists.
Insurance Coverage For Gaps Can Change
Be aware that there are numerous factors in coverage while looking for gap insurance. Some insurance companies, even some major insurers, simply don’t offer this type of coverage, and the scope and cost of coverage might vary greatly. They are not obligated to comply.
Many dealerships or their internal financing firms might also offer gap coverage if your existing vehicle insurer doesn’t or doesn’t offer it in a compelling package. These coverage packages vary in quality, so read the fine print and do your homework.
Also, keep in mind that if you’ve bought a term gap coverage policy, you can usually (but not always) terminate it early if you decide you no longer need the coverage. A portion of the premium you may have paid for a term gap policy may typically (but not always) be refunded to you if you cancel it early. Read the details again.
How Can I Make Use of My Gap Coverage?
Your own insurance carrier will already be investigating a gap coverage claim for you if you currently have a collision or comprehensive claim open with them. Consider presenting your own insurer with a collision claim if you are dealing with the property damage liability insurance of a careless party who damaged your vehicle.
The vehicle’s value is probably not significantly different between them, and filing a claim with your own insurance is probably going to be quicker overall. However, your own insurer will need to be informed in order to manage your gap coverage claim if you attempt to resolve your property damage through the insurance of another driver.
The contact details and account number for the company that provides your auto loan or lease are also required by your insurance so that they can coordinate with you on loan or lease repayment.
Due to the fact that all payments will be made to your auto loan or leasing company to settle the outstanding balance, you will regrettably not be able to receive any compensation for the damage to your vehicle in these circumstances. However, you won’t have to pay thousands of dollars out of pocket, so that is something.
The gap insurance coverage process is further described in the video below.
Additional Information Regarding Insurance Coverage
See the links below for more details on the insurance coverage your auto insurance policy might provide:
- collision insurance
- comprehensive protection
- Coverage for liability
- coverage for uninsured motorists (UM)
- Insurance for uninsured drivers (UIM)
- insurance and reimbursable medical expenses
- umbrella coverage for insurance