Gap Insurance: Is It Covered By Marcosian Auto Insurance?

Gap insurance is an optional auto insurance coverage that covers the difference between the depreciated value of a car and the loan amount owed if the car is involved in an accident, stolen, or deemed a total loss. It is designed to protect individuals who owe more on their car loan than the current value of their vehicle. Gap insurance is typically purchased in addition to a full-coverage policy, which includes liability, collision, and comprehensive insurance. It is important to note that gap insurance does not cover theft, engine failure, transmission failure, death, or your car insurance deductible. The need for gap insurance depends on factors such as the loan amount, down payment, financing period, and vehicle depreciation rate.

When is gap insurance needed?

Gap insurance is needed when you want to protect yourself financially from owing money on a depreciated vehicle. It is a good idea to consider buying gap insurance for your new car or truck purchase if you meet the following criteria:

• You made less than a 20% down payment
• You financed for 60 months or longer
• You leased the vehicle (as carrying gap insurance is generally required for a lease)
• You purchased a vehicle that depreciates faster than the average
• You rolled over negative equity from an old car loan into the new loan

You may be able to skip gap insurance if:

• You made a down payment of at least 20% on the car when you bought it
• You’re 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

Gap insurance is not required by any insurer or state, but some leasing companies may require you to purchase it. You also don't need gap insurance if you don't have a car loan or a lease.

What does gap insurance cover?

Guaranteed Asset Protection (GAP) insurance is an optional product that covers the difference between the amount you owe on your auto loan and the amount the insurance company pays if your car is stolen or deemed a total loss. This type of insurance is designed for people who finance or lease their vehicles.

GAP insurance covers what is owed on a car after a total loss, whether that's the result of an accident or vehicle theft. It pays out after comprehensive and collision coverage, which are typically required when you buy or lease a new vehicle. Comprehensive and collision insurance only pay what a car is worth at the time of a theft or accident, so when you owe more on your car loan or lease than that, GAP insurance covers that amount.

GAP insurance does not cover your comprehensive or collision deductible, nor does it cover costs related to vehicle repairs, personal injuries, or other accident-related expenses.

For example, if you owe $25,000 on your loan and your car is only worth $20,000, your GAP coverage will cover the $5,000 gap, minus your deductible.

Does gap insurance cover theft?

Gap insurance covers 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 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 the car is considered "totaled". Each state has different rules on what constitutes a total loss, based on the estimated price of repairs compared to the car's value.

To receive a gap insurance payout for a stolen car, 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 check.

How much does gap insurance cost?

The cost of gap insurance varies depending on the provider and the vehicle being covered. Dealerships and lenders typically charge a flat rate for gap insurance, which can range from $500 to $700. This option usually involves paying a one-time fee and results in higher overall costs due to the interest accrued by rolling the insurance into your loan.

On the other hand, insurance companies often charge lower rates for gap insurance, typically between $20 and $40 per year when bundled with an existing insurance policy. This option only increases your comprehensive and collision insurance cost by about 5 to 6% on average. If you prefer to purchase a standalone gap insurance policy, you can expect to pay a one-time fee ranging from $200 to $300.

In Indiana, gap insurance costs an average of $2 to $30 per month, depending on the provider. While the cost of gap insurance doesn't vary significantly by state, it's important to note that some states require car dealers to offer it to their customers.

When considering the cost of gap insurance, it's worth noting that it is optional coverage that protects you financially in the event of a total loss or theft of your vehicle. It covers the difference between the current value of your vehicle and the amount you still owe on your loan or lease, ensuring that you don't incur additional expenses after a total loss.

Where can I buy gap insurance?

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 your vehicle is worth and what you owe on it. For example, if your car is worth $20,000 but you owe $25,000 on your loan, gap insurance will cover the $5,000 gap, minus your deductible.

You can buy gap insurance from most major insurance companies, including Progressive, Nationwide, State Farm, and Allstate. You might also be able to purchase it through your car dealership. However, if you buy gap insurance from a dealership, you might end up paying extra because the cost is added to your principal, which is then used to calculate your interest. So, it's a good idea to ask your insurance company to add gap insurance to your policy.

If you already have car insurance, the easiest way to buy gap insurance coverage is to contact your existing insurance provider and ask about adding it to your policy. If you don't have car insurance, compare quotes from major insurance companies that offer gap insurance.

It's worth noting that gap insurance must be purchased at the same time as your car, and you must be the car's first owner. Additionally, you need comprehensive and collision coverage in order to add gap coverage to your car insurance policy.

Frequently asked questions