Gap Insurance: Do I Need It?

If you're wondering whether you have gap insurance, the first step is to check your existing car insurance policy and the terms of your loan or lease. Gap insurance covers the difference between the amount you paid for your car and its value at the time of an accident, theft, or total loss. This type of coverage is often offered as an optional add-on by insurers or dealers, so it's important to review your policy documents to confirm if you have it. If you're unsure, contacting your insurance company or agent is a good idea to get a definitive answer.

Check your car insurance policy

Checking your car insurance policy is the best way to know if you have gap insurance. This type of coverage is usually offered as an optional add-on by insurers or dealers, so it's a good idea to find out if you already have it before adding more.

Firstly, check your current car insurance policy documents. Car insurance documents generally have a page that lists the coverages on your policy, including optional coverages. Look for gap coverage in this list. If you are unsure, call your insurance company to ask about your coverage.

Secondly, check the terms of your lease or loan. Gap insurance is sometimes included in lease agreements, and some dealers include gap insurance as part of your monthly loan payments. Check your sale documents, as well as any documents from the dealer and lender, to see if gap coverage is included.

If you are still unsure, you can check your financial records, such as online bills, credit card statements, and chequebook, to try to find some clues. However, it is unlikely that you bought a stand-alone gap insurance policy without realising it, so your first step should be to check with your insurance company and dealer.

Check your lease or loan terms

Checking the terms of your lease or loan is a crucial step in determining whether you have gap insurance. Gap insurance, also known as "guaranteed auto protection", is often offered as an optional add-on by dealers or lenders, and in some cases, it might be included automatically in your lease or loan agreement. Here are some detailed steps to help you check your lease or loan terms:

• Review your lease or loan documents: Carefully review the documents you received when you leased or financed your vehicle. Look for any mention of "gap insurance" or "gap coverage". This information is typically found in the section outlining the details of your lease or loan.
• Understand the difference between gap insurance and a gap waiver: While similar, these are two different types of protection. Gap insurance is typically purchased from an insurance company or dealer and covers the difference between your vehicle's market value and the remaining loan balance in the event of a total loss. On the other hand, a gap waiver is a clause included in some lease contracts, which also covers the difference between the car's market value and your remaining principal but is not considered insurance.
• Check if gap insurance is included in your monthly loan payments: Some dealers or lenders include gap insurance as part of your monthly loan payments. This information should be available in your sale or financing documents. If you financed your vehicle through a bank or other lender, be sure to check the documents from both the dealer and the lender, as either of them might have included gap coverage.
• Determine if your lease or loan requires gap insurance: In some cases, your lease or loan agreement may require you to purchase gap insurance separately. This is particularly common when leasing a vehicle or financing a new vehicle. Review the terms and conditions of your lease or loan agreement carefully to see if there are any mentions of mandatory gap insurance.
• Contact your dealer or lender: If you're unsure whether gap insurance is included in your lease or loan, don't hesitate to contact your dealer or lender directly. They should be able to clarify the terms of your agreement and let you know if gap insurance is included or required.
• Understand the benefits of gap insurance: Gap insurance is designed to protect you financially in the event that your vehicle is totaled or stolen. It covers the "gap" between the remaining loan balance and the vehicle's market value, which can depreciate quickly. This type of insurance is especially valuable if you have a long-term loan, made a small down payment, or leased your vehicle, as you may owe more than the car's current value.

Contact your insurance company

Contacting your insurance company is the best way to find out if you have gap insurance. This is especially true if you have purchased a brand-new vehicle, as gap insurance can help bridge the divide between your loan amount and your car's depreciated value.

Firstly, check your existing car insurance policy and the terms of your loan or lease. Gap insurance is usually offered as an optional add-on by insurers, so it's a good idea to find out if you already have it before adding more coverage. Car insurance documents generally have a page that lists the coverages on your policy, so look for gap coverage in this list. If you are unsure, call your insurance company to ask about your coverage.

If you didn't buy gap insurance from your regular insurance company, you may have purchased it from the dealership, bank, or credit union that supplied your loan or lease. It can be easy to overlook gap insurance from these sources, as it is sometimes included in your contract automatically. Check your sale documents, as some dealers include gap insurance as part of your monthly loan payments. If you financed through a bank or other lender, check the documents from both the dealer and the lender, as either of them might have included gap coverage.

If you are still unsure where your gap coverage is from, you may need to check several places to get a definitive answer.

Contact your auto lender

If you are unsure whether you have gap insurance, it is a good idea to contact your auto lender. Gap insurance is sometimes included in your contract automatically, so it is worth checking. If you financed your vehicle through a bank or other lender, check the documents from both the dealer and the lender. Either of them might have included gap coverage automatically.

If you know you bought gap coverage initially but are unsure whether you still carry it, you can usually check by calling your agent or insurance company. If you're unsure where you got your gap coverage in the first place, you'll likely need to check several places to get a definitive answer.

Gap insurance covers the difference between the depreciated value of a car and the loan amount owed if the car is involved in an accident. It is a supplemental auto policy that covers any difference between the insured current value of a vehicle and the balance of a loan or lease. If a vehicle is totalled or stolen before the loan is paid, gap insurance covers the difference between the auto insurance payout and the loan amount owed on the vehicle.

Gap insurance is optional car insurance coverage that helps bridge the financial gap for drivers whose car loan balance is more than what their vehicle is worth if it’s totalled. It is worth noting that gap insurance does not cover any interest the lender charges you, any late fees or missed loan payments, or any extended warranties added to your auto loan.

Check your financial documents

Checking your financial documents is a good way to find out if you have gap insurance. This type of insurance covers the difference between what you owe and what your insurance company pays if your car is stolen or damaged. It is an optional insurance intended for those who lease or finance a new car and owe more on the car than it is worth at the time of the incident.

To check if you have gap insurance, start by reviewing your existing car insurance policy and the terms of your loan or lease. Gap insurance is often offered as optional coverage by insurers or as an extra add-on by dealers. So, check your insurance documents and look for a page that lists the coverages included in your policy. If you find a list of coverages, look for gap coverage or loan/lease payoff coverage, which is similar to gap coverage.

Next, review your sale and loan documents from both the dealer and the lender. Some dealers include gap insurance as part of your monthly loan payments, so it may be included in your sale documents. Even if you didn't buy gap insurance from your dealer, they may have included it automatically. If you financed your vehicle through a bank or other lender, be sure to check the documents from both the dealer and the lender to see if either of them included gap coverage.

If you are unsure whether you have gap insurance or not, you can also contact your car insurance provider or the car dealership where you purchased the vehicle. They may be able to confirm if you have gap insurance through your policy or if it was included in your purchase.

Frequently asked questions