Gap Insurance And Auto Theft: Understanding The Coverage

Gap insurance covers auto theft if the car is deemed unrecoverable or if the car is recovered but has sustained enough damage to total it. In the case of a total loss due to theft, gap insurance pays for the difference between a car's actual cash value (ACV) and the auto loan or lease balance.

Gap insurance covers theft if the car is deemed unrecoverable

Gap insurance covers theft, but only if the car is deemed unrecoverable or if the car is recovered but has sustained enough damage to total it. In the case of a total loss due to theft, gap insurance pays for the difference between a car's actual cash value (ACV) and the auto loan or lease balance.

Gap insurance companies usually require a waiting period of around 30 days before a stolen car can be deemed impossible to recover. After this waiting period, most gap insurance companies will ask for a copy of the police report detailing the theft before agreeing to pay for a claim.

If a car is recovered after being stolen, gap insurance will only pay out if it's considered "totalled". Whether a car is considered "totalled" depends on the state, based on the estimated price of repairs compared to the car's value.

To receive a gap insurance payout for a stolen car, you will need to get a copy of the police report, file a claim with your standard insurer, and then file a claim with your gap insurance provider. Gap insurance companies thoroughly investigate claims for stolen cars to prevent fraud, so expect a wait before receiving a payout.

If the car is recovered but damaged, gap insurance will pay out if it's considered totalled

If your car is stolen and recovered but damaged, gap insurance will pay out if it's considered "totalled". This means that the cost of repairs exceeds the car's value, and each state has different rules on what constitutes a total loss. Gap insurance covers the difference between the remaining value of your vehicle loan or lease and your vehicle's actual cash value at the time of the incident.

For example, if you owe $25,000 on your loan and your car is only worth $20,000, gap insurance will cover the $5,000 gap, minus your deductible. This payout is designed to protect you from depreciation, which begins as soon as you buy your car. Over time, the gap between what you owe and the car's value widens, and gap insurance covers this difference in the event of a total loss.

To qualify for a gap insurance payout, you must first wait around 30 days for the stolen car to be deemed unrecoverable. You will then need to file a police report and a claim with your standard insurer before filing a claim with your gap insurance provider. The gap insurance company will thoroughly investigate the claim to prevent fraud, so expect a wait before receiving a payout.

Gap insurance is optional and not required by any insurer or state. However, it is a valuable safeguard if you owe more on your car loan than the car is worth, helping you to avoid making loan or lease payments for a car you can no longer drive.

To receive a gap insurance payout, you'll need a copy of the police report

To receive a gap insurance payout for a stolen car, you'll need to take several steps, including obtaining a copy of the police report. Here's a detailed guide on what to do:

First, understand that gap insurance covers theft if the car is deemed unrecoverable or if it is recovered but damaged enough to be considered a total loss. Gap insurance pays the difference between your car's actual cash value (ACV) and the auto loan or lease balance if it is declared a total loss due to theft. Gap insurance companies usually require a waiting period of around 30 days before a stolen car can be deemed unrecoverable. During this waiting period, you should file a police report on the vehicle theft, as the insurance company will ask for this report before agreeing to pay your claim.

After the waiting period, if your car has not been recovered, you can proceed with filing your claim. Contact your gap insurance company or the dealer to understand their specific claims process and requirements. You will likely need to provide documentation that shows the difference between what you owe on your loan or lease and the car's value at the time of theft. This documentation may include:

• An insurance settlement statement showing the vehicle's ACV and the reimbursement amount from your insurance company.
• A copy of the settlement check paid to the lienholder/lessor.
• Your original loan or lease contract, including financing terms.
• A complete loan history, including charges, payments, and the current outstanding balance.
• A copy of the police report detailing the theft.
• The original sales agreement from the dealer showing the purchase price of the car.

Having gap insurance with the same company that provides your comprehensive or collision coverage may simplify the claims process as they will have access to some of these documents. However, you will still likely need to submit most of the paperwork, either in person or via electronic means.

It's important to act promptly on any requests for additional documentation and to follow up with the insurance company to ensure a swift resolution. Remember, a gap insurance claim can take several weeks or even months to process, and you are responsible for continuing to make your loan or lease payments during this waiting period.

By following these steps and providing the necessary documentation, including a copy of the police report, you can receive a gap insurance payout for your stolen vehicle and settle your loan or lease balance.

Gap insurance covers the difference between the remaining value of your vehicle loan and its actual cash value

Gap insurance typically covers the difference between the remaining value of your vehicle loan or lease and your vehicle's actual cash value at the time of the incident. More specifically, gap insurance will cover this difference in the case of a total loss or theft. It's important to note that gap insurance will not cover deductible costs or costs associated with vehicle repairs and bodily injuries resulting from an incident.

For example, let's say you buy a $40,000 car. Two years later, you're in an accident, and your car is declared a total loss. The market value of your car at this point may have depreciated to $22,000, but you still owe $26,000 on your loan. That $4,000 "gap" is the difference between the remaining value of your vehicle loan and its actual cash value. Without gap insurance, you would be responsible for paying that difference. However, with gap insurance, this gap would be covered, and you would only be responsible for any applicable deductible.

Gap insurance is not required by law, but it can provide valuable financial protection in certain situations. It is usually only necessary if you lease or finance your car and its value is less than what you owe. It may be a good idea to consider gap insurance if you made a small down payment, have a long finance period, or purchased a vehicle that depreciates quickly.

In summary, gap insurance covers the difference between the remaining value of your vehicle loan and its actual cash value, providing financial protection in the event of a total loss or theft. It is important to review the specific terms and conditions of your gap insurance policy to understand what is and is not covered.

Gap insurance is not required, but it can be a wise choice in certain situations

When you buy a new car, it begins to lose value immediately, and often very quickly. If your car is stolen or declared a total loss due to an accident, standard insurance policies will pay the actual cash value of the car at the time of the incident. This means that if you still owe money on your loan, you'll have to continue paying it off, even though you no longer have a car.

This is where gap insurance comes in. It covers the difference between the remaining value of your vehicle loan or lease and the actual cash value of your car at the time of the incident. For example, if you owe $24,000 on your loan and your car is worth only $20,000 when it's totaled, gap insurance would cover the $4,000 gap. Gap insurance also covers theft if the car is deemed unrecoverable or if the car is recovered but has sustained enough damage to total it.

Gap insurance is not always necessary. If you've made a large down payment, have a short loan term, or your car depreciates slowly, you may not need gap insurance. It's important to consider your specific circumstances and decide if gap insurance is right for you.

Frequently asked questions