Gap Insurance: Job Loss Protection

Gap insurance is an optional auto insurance coverage that applies if your car is stolen or deemed a total loss. It covers the difference between what you owe on your car loan and what your car is actually worth. However, it does not cover your car payments if you lose your job. Job loss insurance, also known as payment protection insurance, is a separate type of policy that covers loan payments, including car payments, if you become unemployed.

Gap insurance covers the difference between the value of your car and what you owe on it

Gap insurance is an optional auto insurance coverage that applies if your car is stolen or deemed a total loss. It covers the difference between the value of your car and what you owe on it. This difference, or "gap", can be thousands of dollars if your down payment was less than 20% or you financed your loan for 60 months or more.

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 difference, minus your deductible. This type of insurance is particularly useful for people who put no money down and choose a long payoff period, as they may owe more than the car's current value.

Gap insurance is not required by any insurer or state, but some leasing companies may require you to purchase it. It is also worth noting that gap insurance does not cover other property or injuries resulting from an accident, nor does it cover engine failure or other repairs.

You can typically buy gap insurance from car insurance companies, banks, and credit unions. It is also sometimes offered by car dealerships, but this is usually more expensive. The cost of gap insurance could be rolled into your car loan, but this means you will pay interest on it and you will lose the flexibility to cancel the insurance.

Gap insurance is optional

Gap insurance is an optional form of auto insurance that covers the difference between the amount you owe on your car and its current value in the event of a total loss. This can include situations where your car is stolen or involved in an accident.

Gap insurance is designed to protect you from depreciation. As soon as you drive a new car off the lot, it becomes a used car and loses value. If your car is stolen or written off, your auto insurance will only pay you what the car is currently worth, not what you originally paid or how much you still owe. This can leave a gap of thousands of dollars between what you owe and what the car is worth.

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 difference, minus your deductible.

Gap insurance is not required by any insurer or state. However, it is a good idea to consider it if:

• You are leasing your car
• You made a lower down payment on a new car (less than 20% of the sale price)
• You have a longer financing term for your vehicle
• You want to protect yourself against depreciation, especially if you have a car that depreciates faster than average
• You have a loan rollover, where you owe more on your loan than your car is worth at the time of renewal

You can typically buy gap insurance from car insurance companies, banks, and credit unions. It is also sometimes offered by car dealerships when you purchase or lease a vehicle, but this is usually more expensive than buying it from an insurer.

You can get gap insurance from car insurance companies, banks, and car dealerships

Gap insurance covers the difference between what you owe on your car and what it is worth. It is useful if you have negative equity on your vehicle, which means you owe more than the car is worth. You can get gap insurance from car insurance companies, banks, and car dealerships.

If you're buying or leasing a new car, you can get gap insurance from the dealer or your auto insurance company. Usually, gap insurance is optional if you're financing a purchase, but it might be mandatory if you're leasing a vehicle. Buying gap insurance from a dealer can be more expensive if the cost of the coverage is bundled into your loan amount, which means you'll be paying interest on your gap coverage. On the other hand, buying gap insurance from an insurance company may be less expensive, and you won't pay interest on your coverage.

Gap insurance is not mandatory in Massachusetts, but your lender or lessor might require you to get it. Although gap insurance is offered through car dealers or lenders, you might get the best rates from a car insurance company.

Some car insurance companies that offer gap insurance include:

• Progressive
• Arabella
• Travelers
• Liberty Mutual
• Nationwide
• Allstate
• The Hartford

Gap insurance doesn't cover engine failure or repairs

Gap insurance covers the difference between what you owe on your car and what it’s worth. It is a type of auto insurance coverage that you should consider buying if you have leased or financed your vehicle. It is optional coverage and not required by any state as part of your car insurance policy.

Gap insurance does not cover engine failure or repairs. Engine failure is typically only covered by insurance policies in the case of a covered incident, such as an accident or comprehensive loss. Collision and comprehensive auto insurance policies generally cover engine failure if a collision or another covered incident caused it.

If you want to insure your vehicle against general engine failure, you will need to purchase an extended warranty or mechanical breakdown coverage. Some car manufacturers offer job loss insurance, which can provide payment relief for a limited time if you become unemployed.

You can cancel gap insurance when you owe less than your car's value

Gap insurance covers the difference between what you owe on your car loan and what your car is worth. It is useful if you owe more than your car is worth, which can happen if your down payment was less than 20% or you financed your loan for 5 years or more. In this case, if your car is stolen or totaled, your auto insurance will only pay you what the car is currently worth – not what you owe.

You can cancel gap insurance when you owe less than your car is worth. This usually takes about two years, but you can compare how much you owe on your loan with online car value guides to check. If you pay off your loan early or sell the vehicle, you should cancel the policy. You can also get a refund for gap insurance if you no longer want or need it, change gap insurance companies, or sell your vehicle.

To cancel your gap insurance, contact your gap insurance company and ask them to cancel your policy and issue a refund for any unused coverage. Be prepared to provide information and documents, such as proof that your vehicle was sold or paid off, and verification of your car’s current mileage. You will also need to fill out any necessary documentation or forms.

Frequently asked questions