Dmv And Gap Insurance: What's The Deal?

The DMV does not know if you have gap insurance. Gap insurance 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 an incident. It covers the difference between what you owe and what your insurance company pays if your car is stolen or damaged. To check if you have gap insurance, review your current car insurance policy, lease, or loan agreement. Contact your insurance agent or company if you are unsure.

How to check if you have gap insurance

To check if you have gap insurance, you can refer to your existing car insurance policy and the terms of your loan or lease. Gap insurance can be purchased through your insurance company or separately through your auto lender, so it's important to look for gap coverage in the list of coverages provided by both. Here are some detailed steps you can take:

Check with your car insurance company:

Review your recent bills or log in to your account on their website. If you're unsure, give them a call to ask about your coverage.

Check with your auto lender:

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 provided your loan or lease. Gap insurance may be included in your contract automatically, so it's important to review your loan or lease agreement carefully.

Review your lease agreement for a GAP waiver provision:

Whether you're financing or leasing your vehicle, don't assume that GAP insurance is required. However, some car loan and leasing companies include a GAP waiver provision in their agreements, which covers the difference between what you owe and what's paid out by the insurance company.

Check your financial documents:

If you haven't found any indication of gap insurance through the above steps, you can review your financial records, such as online bills, credit card statements, and checkbook, for any clues or payments related to gap insurance.

Remember, gap insurance covers the difference between your loan balance and the actual value of your car. It's unlikely that you would have purchased a standalone gap insurance policy without realizing it, so it's best to start by checking with your car insurance company and auto lender.

What is gap insurance?

Gap insurance is an optional insurance product that covers the difference between the amount you owe on your auto loan and the amount your insurance company pays if your car is stolen or totalled. It is 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. In other words, gap insurance covers the difference between the car loan balance and what your insurance provider pays off after you make a claim.

When you buy or lease a new car, it starts to depreciate in value as soon as it leaves the car lot. Most cars lose 20% of their value within a year. Standard auto insurance policies cover the depreciated value of a car, meaning they pay the current market value of the vehicle at the time of a claim. However, in the early years of the vehicle's ownership, the amount of the loan may exceed the market value of the vehicle itself. This is usually known as negative equity or being upside-down on your auto loan.

Gap insurance is particularly useful if you made less than a 20% down payment, financed your car for 60 months or more, leased the vehicle, purchased a vehicle that depreciates faster than average, or rolled over negative equity from an old car loan to a new one.

You can usually get gap insurance from your auto insurance company, and some direct lenders also offer gap policies. Dealers will also likely offer gap insurance when you purchase or lease a car, but they typically charge more than insurers.

Do I need gap insurance?

Gap insurance is an optional, additional coverage that can help certain drivers cover the difference between the financed amount owed on their car and the car's actual cash value (ACV) in the event of a covered incident where their car is declared a total loss.

Gap insurance is 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. It is also required for leased vehicles.

You should consider getting gap insurance if:

• You owe more on your car loan than the car is worth.
• Your car loan or lease requires gap insurance.
• You made less than a 20% down payment.
• You have a long finance period.
• You purchased a vehicle that depreciates quickly.
• You rolled over negative equity from an old car loan into the new loan.

You may not need gap insurance if:

• You made a down payment of at least 20% on the car.
• You are paying off the car loan in less than five years.
• The vehicle is a make and model that historically holds its value better than average.

If you are unsure whether you have gap insurance, you can check your current car insurance policy or the terms of your lease or loan. You can also contact your car insurance provider or the dealership where you bought the car.

How to check if you have gap insurance from your dealer

To check if you have gap insurance from your dealer, you can refer to your sale documents. If you financed your car through a bank or lender, check the documents from both the dealer and the lender. Dealers sometimes include gap insurance as part of your monthly loan payments, and some lenders may include a gap waiver in your loan or lease, eliminating the need for gap insurance.

If you know you initially bought gap insurance but are unsure whether you still have it, you can call your agent or insurance company to check. If you're unsure where you purchased your gap coverage, you may need to check with multiple parties to get a definitive answer.

Gap insurance is typically offered as an optional add-on by dealers, so it's a good idea to find out if you already have it before purchasing more.

How to check if you have gap insurance from your insurer

To check if you have gap insurance from your insurer, you can refer to your existing car insurance policy and the terms of your loan or lease. Gap insurance covers the difference between your loan balance and the car's actual value, and it is usually offered as an optional add-on by insurers or dealers.

• Review your car insurance documents: Look for a page that lists the coverages included in your policy. Gap insurance is typically listed as an optional coverage, such as auto collision coverage or comprehensive car insurance coverage.
• Contact your insurance company: If you are unsure, call your insurance agent or company to ask about your coverage. They can confirm whether gap insurance is included in your policy.
• Check your financial documents: If you cannot find any mention of gap insurance in your insurance policy, you can review your financial records, such as bills, credit card statements, or bank statements. Look for any clues that indicate the purchase of gap insurance.
• Review your lease or loan agreement: Gap insurance is sometimes included as a standard feature or an optional add-on in lease or loan agreements. Check the terms of your contract to see if gap insurance is mentioned.
• Contact your car dealership: If you cannot find any information in your insurance policy or financial records, you can reach out to the car dealership where you purchased the vehicle. They may be able to confirm if gap insurance was included in the sale or provide recommendations for trusted providers.

It is important to note that gap insurance is typically offered as an optional coverage or add-on, so it may not be automatically included in your insurance policy. By following the steps above, you can determine whether you have gap insurance and, if necessary, take steps to purchase it from your insurer or a recommended provider.

Frequently asked questions