GAP insurance complements your primary insurance policy to ensure that you stay protected against all potential financial losses. It compensates for the value lost as a result of the robbery, vandalism, and natural disasters such as hurricanes, tornadoes, storms, and floods. When you have GAP insurance and your vehicle is involved in an accident, that loss can also be covered by the policy.
If you find yourself in a particular financial emergency, getting GAP insurance can provide you with further aid. If you placed a down payment on your vehicle that was less than 20 percent or if your auto loan is 60 months or longer. GAP insurance may be able to offer you a helping hand in the event that you need to file a claim.
This article will answer all of your questions such as what is GAP insurance. When do you need GAP insurance, how do I know If I have GAP insurance and other related questions.
What is GAP Insurance?
Gap insurance is a type of auto insurance that car owners can buy to protect themselves against losses. They can happen if the amount of money they get from a total loss doesn’t cover everything they still owe on their loan or lease.
Gap insurance only covers the difference between how much you still owe on the car and how much it is worth. It usually comes into play when your car is stolen or wrecked. Due to repairs, damage, or injuries, it doesn’t give any benefits. To add gap coverage to a car insurance policy, you also need to have comprehensive collision coverage.
When do you need GAP insurance?
Having GAP insurance is always a priviledge but there are certain citations in which GAP insurance is pretty useless
The car bought on credit with no or very little down payment
As soon as you drive off the lot without a sizable down payment, you’ll be in the negative equity position of your auto loan. It could take several years for the loan total to equal the car’s fair market value.
The vehicle has a poor resale value
Without a sizable down payment, you may rapidly find yourself in negative equity if you bought a depreciating vehicle. The term “substantial” refers to a numerical value of 25% or more.
The vehicle was an upside-down vehicle
Unless you pay the difference in cash when trading in an upside-down vehicle, the dealership will add the amount you owe to the loan balance of the new vehicle. If your automobile is stolen or totaled, the remaining balance could be used to collect on the loss.
The car owner wants to rack up the miles rapidly
Extensive use is one of the quickest ways to depreciate a car. If you drive a lot, your automobile will lose value quicker than your payments can keep up with inflation
The owner took a long-term car loan
The time at which your loan balance is equal to the car’s worth, known as “break-even,” delayed further by a loan with a longer term.
How to know if you have GAP insurance?
In contrast to liability insurance, mandated by most states, purchasing GAP insurance is voluntary. You must either specifically request GAP insurance coverage for your vehicle or actively seek it out and add it to your existing insurance policy in order to have it cover your vehicle. If you lease a vehicle, you may be obliged to get GAP insurance. When this is the case, the terms of your lease agreement should make this requirement clear.
How to review existing car insurance coverage?
Whether you are wondering, “how can I find out if I have gap insurance” the best thing you can do to find out if you have gap coverage is by reviewing your existing auto insurance policy or the terms of your lease or loan.
There are different kinds of coverage in car insurance policies. Some of them required by law or needed for cars leased or financed. Others are not required. All of this information is on the declaration page of your policy, which is usually the first page. Check it carefully to make sure that everything is right.
- What insurance company it is
- Your name and where you live
- The number of the plan
- When coverage starts and when it ends
- A list of motorists
- Information about your car, like it’s make, model, and vehicle identification number
- Types of coverage and how much they cover
- Prices for each type of coverage
- Endorsements or riders
Some types of coverage have limits, and others have deductibles.
Now, you might be thinking how do I find out if I have gap insurance from this information? The answer is easy. Just click on the menu spelled types of coverage and how much they cover. Then go to physical damage coverage.
Checking Physical Damage Coverage of Automobiles
Your vehicle is protected by the forms of coverage known as collision and comprehensive. You will get coverage in terms of having GAP insurance. After being involved in a collision with another vehicle or an object, such as a utility pole, your GAP insurance will pay to repair or replace your vehicle. It also protects you if a pothole or another road hazard causes damage to your vehicle or if your vehicle rolls over.
GAP insurance pays to replace vehicles that have been stolen and cover damages that were not the result of an accident. Such as those caused by falling items, fires, floods, storms, vandalism, or wild animals such as deer.
You are not required by the laws of the state to carry either collision or GAP insurance. However, if you want to finance or lease a vehicle, the financial institution or leasing business that you work with will require you to get both collision and comprehensive insurance.
How to Check the Terms of Automobile Lease or Loan?
You are protected by “GAP insurance” in the event that your rented car is stolen or involved in an accident that totals it. When seen from the perspective of the leasing company, the total loss of the vehicle constitutes early termination of the lease.
Typically, your auto insurance company would pay off the claim, but what happens if the amount that you still owe the leasing company is higher than the current market value of the vehicle? The difference between the two prices is referred to as the “gap,” and you would be liable for making payments to the leasing firm equal to that amount.
If you fulfill the requirements for a certain type of insurance, the “GAP waiver” provision of some leases will shield you from financial losses caused by gaps in coverage, while other leases will not. When there is no gap waiver in the lease, your liability is covered by gap insurance. When you sign off on the remaining terms of the lease, it is in your best interest to get gap insurance from the leasing firm.
GAP insurance is normally a voluntary insurance product unless specified in the terms of your loan or lease agreement that you can choose to purchase or not. However, if you have lately spent a lot of money on a new automobile, this could provide you with a significant amount of peace of mind. Most people who have a considerable amount of negative equity in a vehicle may consider purchasing gap insurance for their vehicles. Now that you have the answer to your question about how to if you have GAP insurance, must ask your leaser or insurance provider about your GAP insurance statement.
How can you get GAP insurance?
There are two ways you can get GAP insurance. One is from the insurance company and the other is from the dealer.
When you purchase or lease a vehicle, the dealer will likely inquire as to whether or not you are interested in purchasing gap insurance when you discuss the various financing choices available to you. Purchasing gap insurance from a dealer can be more expensive. If the cost of the coverage is bundled into your loan amount. In this case, you would be paying interest on your gap coverage in addition to the premium for the coverage itself.
How much does GAP insurance cost?
It is up to the underwriter to determine how much GAP insurance will cost. When it comes to GAP insurance, dealerships and lenders typically demand more expensive premiums than vehicle insurance companies. GAP insurance is often sold by lenders and dealerships for a flat charge. Which can range anywhere from $500 to $700 on average. These are the highest rates available for this sort of policy. Additionally, because the amount will roll into your loan. You will be responsible for paying interest on it.
When customers bundle GAP insurance into a current insurance policy, however, insurance firms charge anywhere from $20 to $40 more each year on average for the buyer’s premiums for the GAP insurance. It will only increase your comprehensive and collision insurance premiums by approximately five to six percent on average if you do this, which makes it a great deal more inexpensive.
How can I claim GAP insurance?
To begin, you will need to file a claim with your vehicle insurer in order to obtain the information necessary to inform your GAP insurance provider of the amount of the shortfall.
Be sure to examine your terms and conditions to see if there is a time limit with filing a claim. Once you have determined the amount of the deficit that needs to be covered, contact your GAP insurance provider through phone or email to begin the process of filing a claim and covering the gap.
If this article was helpful, you might also read our pieces on business auto insurance and electric cars.
How long does GAP insurance last?
The majority of the time, gap insurance covers you for the entirety of your loan. This indicates that your gap insurance will continue to be active until such time as you have paid off your loan.
To remove gap insurance from your loan, you will most likely need to contact your lender. This is because each firm handles things slightly differently. Highly improbable that there will be a specific expiration date separate from the day on which your loan pays off.
If you bought gap insurance from the same company that insures your vehicle, then you presumably make a monthly payment for coverage. In this scenario, you are free to terminate it whenever you choose simply by contacting your service provider.
The majority of lenders will let you terminate your gap insurance policy if you decide you no longer need it. You might possibly qualify for a prorated return. But this will depend on the provider as well as how you pay for your gap insurance. If you decide to cancel your loan before the end of the term, you will have a refund for any unused premium.