Jeffrey Wade
Guaranteed Auto 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 the amount you owe on your car loan and the car's current value. GAP insurance is not required by any insurer or state, but some leasing companies may require it. When you file a GAP insurance claim, your financial institution will receive the claim check from your auto insurance company and then file the GAP insurance claim. If you don't think your GAP insurance is paying enough for a claim, you can ask for an appraisal. You can also cancel your GAP contract and receive a refund if you haven't made any claims.
| Characteristics | Values |
|---|---|
| Is gap insurance required? | No, gap insurance is not required by any insurer or state. However, some leasing companies may require you to purchase it. |
| When to get gap insurance? | Gap insurance is a good idea if:
|
| What does gap insurance cover? | Gap insurance covers the difference between what you owe on your car loan and the vehicle's worth in case it is stolen or deemed a total loss. |
| How much does gap insurance cost? | The cost of gap insurance is usually about 5% of your annual car insurance premium. The exact price can vary by insurer. |
| How to add gap insurance? | You can add gap insurance when applying for a loan, at the loan closing, or within 1 year of the loan closing. After that, you may need to refinance the loan. |
| How to file a gap insurance claim? | A gap insurance claim is typically filed by your financial institution after they receive the claim check from your auto insurance company. |
| Can you cancel gap insurance and get a refund? | Yes, you can cancel gap insurance and receive a refund if you haven't made any claims. If you cancel within 30 days, you may get a full refund; otherwise, it will likely be a partial refund minus a cancellation fee. |
| What to do if gap insurance doesn't pay enough for a claim? | If you don't think gap insurance is paying enough, you can talk to the company and request an appraisal. |
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What You'll Learn
GAP insurance claim process
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 and what it is worth. The claim process for GAP insurance can be lengthy and involves multiple steps. Firstly, it is important to note that dealers or primary insurance companies may not automatically file a GAP insurance claim, so you might need to initiate the process yourself. You can start by contacting the GAP insurance company or the dealer to understand how to initiate your claim.
The GAP insurance claim process can take several weeks, depending on the circumstances of the accident or theft that led to the claim. The first step in the process is for your vehicle insurance company to determine the actual cash value of your vehicle. This involves submitting the correct and necessary documentation, which may include a police report, insurance settlement statement, loan history, and sales agreement. It is important to act promptly on any requests for additional documentation and to follow up with the insurance company to expedite the process.
Once the vehicle's actual cash value is determined, your GAP insurance provider will verify your loan or lease details before approving the payout. The payout amount may be less than expected due to various factors, including deductions for wear and tear, collection fees, or existing damage. If you are unhappy with the offered payout, you can discuss it with the company and request an appraisal, which involves an independent assessment of the claim.
After the claim is approved and processed, the funds are typically paid directly to your loan or lease holder to cover the remaining balance on your totalled vehicle. It is important to remember that you are required to continue making your loan or lease payments while waiting for the claim settlement to avoid negative credit reporting. Once you receive the settlement funds, you can use them to pay off your remaining loan or lease balance.
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GAP insurance cost
GAP insurance is an optional add-on to standard vehicle insurance. It covers the difference between the depreciated value of a vehicle and the remaining loan or lease balance, in the event of a total loss. This can occur if a vehicle is stolen or can't be repaired after an accident. GAP insurance is useful if your car is worth less than what you owe on your car loan.
The cost of GAP insurance depends on the underwriter. Dealerships and lenders charge higher prices for GAP insurance than car insurance companies. Lenders and dealerships sell GAP insurance for a flat rate, typically between $500 and $700, which are the highest rates for this type of policy. Plus, you will pay interest on the sum since it will be rolled into your loan. Insurance companies, on the other hand, charge an average of $20 to $40 per year for GAP insurance when bundled into an existing insurance policy. This increases your comprehensive and collision insurance cost by about five to six per cent on average. If you want to buy a standalone GAP insurance policy, you can expect to pay between $200 and $300.
The cost of GAP insurance varies by state and insurer. Adding GAP insurance onto a policy may cost an additional $39 a year in Iowa but could be as high as $204 in Missouri. Many insurers offer GAP insurance as an option, typically charging an extra $90 a year. GAP insurance is usually about five per cent of your annual car insurance premium.
In most cases, if you pay for GAP insurance upfront and later sell the car, the provider will refund the unused portion of the policy.
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When to get GAP insurance
Guaranteed Asset Protection (GAP) insurance is an optional 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 the car's worth. It is beneficial if you made a low down payment (20% or less) or have a long loan term (60 months or more).
- When you purchase a brand-new vehicle: Most cars depreciate as soon as they leave the dealership, so the gap between the loan amount and the car's value can be significant early on. GAP insurance ensures that even if your new car is totalled, you won't be left with a large loan balance to repay.
- When you are leasing a vehicle: Leasing companies may require you to purchase GAP insurance due to the high depreciation rates of leased vehicles. In the event of an accident, GAP insurance will protect you from owing substantial sums to the leasing company.
- When you finance a used car: Used car loans can have higher interest rates, and used cars may already have initial depreciation, making the gap between the loan value and the actual value wider. GAP insurance can safeguard against negative equity in this case.
- When you have a long loan term or small down payment: If you have a long loan term or a small down payment, you are more likely to experience a significant gap between the car's value and the loan amount. GAP insurance can provide peace of mind in such cases.
- When you are a high-risk driver: If you have a history of accidents, traffic violations, or a poor credit score, you may face more expensive auto insurance premiums. Adding GAP insurance can protect you financially in case of an accident, even though it may slightly increase your overall insurance cost.
GAP insurance is typically offered at a dealership when financing a new vehicle, but it can also be purchased from most banks, credit unions, and auto insurance companies. It is suggested that you get GAP insurance as soon as you purchase or lease your vehicle, but it can also be added later, up to 12 months after financing your car, depending on your insurance agency.
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GAP insurance coverage
GAP insurance is an optional 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 deemed a total loss. This type of insurance is intended for situations where the loan balance is higher than the value of the vehicle. GAP insurance is not required by any insurer or state, but some leasing companies may require you to purchase it. Dealerships may also automatically add GAP insurance to your loan, but you can decline this coverage.
The cost of GAP insurance varies by insurer and is usually about 5% of your annual car insurance premium. It can be financed into your loan, but this will increase the total amount of interest paid over time. GAP insurance is typically only needed when the down payment on a car was less than 20% or the loan is for 60 months or more, as this can create a significant gap between the value of the car and the loan amount.
GAP insurance applies any time your vehicle is stolen or totalled in an accident and will cover the difference between the remaining value of your vehicle loan or lease and the vehicle's actual cash value at the time of the incident. It does not cover deductible costs, repair costs, or bodily injury expenses. To qualify for GAP insurance, you must have comprehensive and collision coverage on your policy.
If you are unhappy with the amount your GAP insurance is paying for a claim, you can talk to your company before agreeing to a settlement and request an appraisal.
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Cancelling GAP insurance
If you bought GAP insurance through an auto insurer, you can typically call or go online to remove the coverage from your policy. Some insurers may require you to sign a cancellation form and other documents. It's important to review the terms and conditions of your policy to understand any potential fees or penalties for early termination. Depending on the timing of your cancellation, you may receive a prorated refund for the unused portion of your coverage.
On the other hand, if you purchased GAP insurance through a dealership, you may need to contact the dealership or coverage provider directly to initiate the cancellation. In some cases, you may need to refinance your car loan to remove the GAP insurance if it was bundled with your loan. Similar to cancelling through an insurer, you may be entitled to a prorated refund for the unused months of coverage.
It's worth noting that GAP insurance is designed to protect you in the event that your vehicle is totaled or stolen, and you owe more on your loan than the car's actual cash value. Before cancelling your GAP insurance, ensure that you no longer require this protection. Additionally, some leasing companies may require you to maintain GAP coverage for the duration of your lease. Always review the terms of your lease agreement to understand your obligations.
Lastly, when cancelling GAP insurance, be prepared to provide any necessary documentation, such as proof of loan payoff or a cancellation form. By following the steps outlined by your insurer or dealership, you can successfully cancel your GAP insurance and receive any applicable refunds. Remember to carefully consider your financial situation before making any decisions regarding insurance coverage.
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Frequently asked questions
Guaranteed Asset Protection (GAP) insurance covers the difference between what you owe on your car and what it's worth. It is optional and applies if your car is stolen or deemed a total loss.
A GAP insurance claim is typically filed by your financial institution. They will receive the claim check from your auto insurance company and then file the GAP insurance claim.
GAP insurance does not cover any amounts your auto insurer deducts for wear and tear, collection or repossession expenses, or existing damage prior to the incident. It also does not cover the full balance under your financing agreement.
Yes, you can cancel your GAP contract and receive a refund as long as you have not made a claim. If you cancel within the first 30 days, you will receive a full refund. After that, you will receive a partial refund, less a cancellation fee.
