Gap Insurance: Writing A Loss Claim

Gap insurance is an optional auto insurance coverage that applies if your car is stolen or deemed a total loss. When your loan amount is more than your vehicle is worth, gap insurance coverage pays the difference. For example, if you owe $25,000 on your loan and your car is only worth $20,000, your gap coverage covers the $5,000 gap, minus your deductible.

To write a cause of loss to gap insurance, you must first understand the terms of your policy and what is covered. Gap insurance covers the difference between the actual cash value (ACV) of the vehicle and the current outstanding balance on your loan or lease in the event of a total loss. A total loss can be the result of an accident or vehicle theft. It's important to note that gap insurance doesn't cover overdue lease or loan payments, costs for extended warranties, security deposits, add-on equipment, and some other exclusions.

When initiating a gap insurance claim, the first step is to confirm that your motor insurer will not repair or replace your vehicle but instead intends to 'write it off' and make you a market value offer. It is crucial that you do not accept the motor insurer's settlement offer before contacting your gap insurance claims team, as they will guide you through the process and confirm the required documentation. The claims team will then be able to determine the 'shortfall' payment applicable to your claim.

When to make a claim

GAP insurance (or Guaranteed Asset Protection) is designed to cover the difference between what you owe on your car loan or lease and the amount paid out in a total loss settlement from an auto insurer. This type of insurance is particularly useful if you owe more on your car loan than the car is worth.

You should make a claim on your GAP insurance if your vehicle is stolen or written off, and the payout from your auto insurance is insufficient to cover the remainder of your car loan or lease. GAP insurance will cover the difference between the amount you owe and the value of your vehicle at the time of the incident, minus your deductible.

For example, if you owe $27,000 on a car loan for a car that is now worth $24,000, and your insurance deductible is $1,000, your collision insurance would cover $23,000 ($24,000 minus $1,000 deductible). This would leave you with a $4,000 shortfall. In this case, your GAP insurance would cover the $4,000 difference, meaning you wouldn't have to pay it out of pocket.

It's important to note that GAP insurance will only cover this "gap" if you owe more than your car is worth. If the payout from your auto insurance is sufficient to cover the remainder of your loan or lease, there will be no "gap" for the GAP insurance to cover.

Additionally, GAP insurance will not cover repairs to your vehicle, damage to someone else's vehicle, negative equity rolled over from a previous loan, or additional charges related to your loan or lease agreement, such as excess mileage charges.

To make a claim on your GAP insurance, you will need to provide documentation showing the difference between what you owe on your loan or lease and the value of your vehicle when it was stolen or written off. This may include:

• An insurance settlement statement showing the vehicle's value and the amount reimbursed by your auto insurance.
• A copy of the settlement check paid to the lienholder/lessor.
• Your original loan or lease contract.
• A complete loan history, including all charges and payments made, with the current outstanding balance.
• A copy of the police report detailing what happened to the car and when.
• The original sales agreement from the dealer showing how much you paid for the car.

The specific documentation required may vary depending on your GAP insurance provider, so be sure to review their requirements before submitting your claim.

What to do if your claim is denied

If your GAP insurance claim is denied, there are a few steps you can take to try and resolve the issue. Firstly, it is important to understand the common reasons why GAP insurance claims are denied. These include:

• The car is not considered a total loss. GAP Insurance only pays out when the car is deemed a total loss, and your primary auto insurance pays out a claim for the car's value.
• Missed policy payments. Claims may be denied if policy payments have lapsed or fallen behind.
• Lack of proper documentation. When filing a GAP claim, you must provide your insurance company with a copy of your purchase agreement, loan or lease contract, documentation of loan payments, and settlement documents from all insurance claims on the vehicle.
• Rolled-over loan. GAP Insurance will only cover the amount of the original loan that was insured by the GAP policy and will not cover additional loan amounts.
• Primary auto insurance did not pay out. If your primary auto insurance did not cover the vehicle loss, the GAP claim will also be denied. This can occur if the insured is found negligent, such as driving under the influence, or if the vehicle is used for purposes not covered by the policy.

If your claim has been denied, it is recommended that you seek legal assistance to fight the denial. An attorney can file a demand letter or try to negotiate a settlement. If the insurer denies the attorney's claim, you may consider filing a lawsuit against the insurance company. Additionally, reviewing the terms and conditions of your policy is crucial to ensure you did not violate any of them.

How to calculate the value of your car

When it comes to insurance, it's important to know how to calculate the value of your car. This is crucial if you are selling your car to a third party, trading it in for a newer model, or filing an insurance claim. Luckily, there are a number of ways to calculate your car's value.

Online Valuation Tools

One way to calculate the value of your car is to use an online valuation calculator. These tools will ask for details such as the make and model of your car, its engine size, and its mileage. They will then use this information to give you an average value of the car. It's important to note that these tools assume average wear and tear and do not take into account the condition of your car.

Local Car Dealer

Visiting your local car dealer is another way to get an accurate quote for your car's value. Speaking to a motoring expert will allow you to ask any questions you have about your car, and they will be able to see first-hand how the car looks and performs. This means they will be able to give a more accurate valuation than an online tool.

Pricing Guides and Car Value Estimators

You can also use car value pricing guides and estimators to calculate your car's value. These guides will take into account factors such as the make and model of your car, its mileage, and its condition. Three popular car value estimator sites are Kelley Blue Book, Consumer Reports, and NADAguides.

Local Market Comparisons

Another way to refine your estimate is to compare your car to similar cars for sale in your local market. You can search for your vehicle in your local paper's classified ads or on online sites. This will help you understand how your car is priced relative to others and how quickly your car's value is depreciating.

Factors Affecting Car Value

It's important to keep in mind that several factors can affect your car's value. These include the number of previous owners, the service history and maintenance of the car, any parts that are not working properly, and any additional car extras such as parking sensors or leather seats. The colour of your car can also make a difference in its resale value, with yellow, orange, and green cars tending to have higher resale values due to scarcity.

How to calculate the value of your gap insurance

To calculate the value of your gap insurance, you need to know the current value of your vehicle and the remaining balance on your loan.

Firstly, you should consult your lender to find out how much you still owe on your loan. Next, you can use a tool like Kelley Blue Book to find out your car's value. You can also consult a local appraiser to get a more accurate valuation.

Once you have these two figures, you can calculate the "gap" between them. This is the amount that gap insurance would cover if your car was written off or stolen. For example, if you owe $20,000 on your car loan but your car is only worth $15,000, the "gap" is $5,000. This is the amount that gap insurance would pay out if you needed to make a claim.

The value of gap insurance will change over time as your car depreciates and you pay off your loan. Therefore, it's a good idea to review the gap periodically and cancel the insurance once the loan balance is lower than the car's value.

When deciding whether to purchase gap insurance, it's also worth considering how quickly your car is likely to depreciate. Some cars lose value faster than others, and this will affect how much gap insurance could save you in the event of a claim.

The cost of gap insurance will depend on factors such as your state, driving record, vehicle, and loan amount. It typically costs between $50 and $250 per year to add to an insurance policy, but it can be more expensive if purchased from a dealership.

How to cancel your gap insurance

Cancelling your gap insurance is a straightforward process, but there are a few things to keep in mind. Firstly, gap insurance policies have terms and conditions that you must be aware of before cancelling. There may be a cancellation fee, and this can be expensive if you are cancelling soon after purchasing the policy. Some insurers will charge up to 50% of your premium if you cancel within 60 days, so always check the terms and conditions and be aware that you may have to pay a fee.

Secondly, consider whether you will have any gaps in your coverage if you cancel. If you own your car outright, then there will be no gap. However, if you are still making payments on your vehicle, cancelling your gap insurance policy could leave you vulnerable if your car is written off or stolen.

To cancel your gap insurance, you will need to contact your insurer. They will be able to provide you with a form to fill out to cancel your policy and refund any remaining money. You can also cancel by submitting a written request, which should include your name, address, and vehicle identification number (VIN). If you received your gap insurance through an insurance company, you may be able to cancel online.

If you are due a refund, you will need to contact your provider and request your money back. This may take some time to process, so be prepared to wait. If you are requesting an online payment, make sure you get email confirmation of the transaction, including details of fees paid and the total amount returned. Keep all relevant documentation, such as policy numbers, cancellation letters, and email notifications. It is also important to keep your contact details up to date so that the insurance company can get in touch if there are any issues.

In summary, cancelling your gap insurance is usually a simple process, but it is important to be aware of any potential fees, and to ensure that you will not be left with a gap in your coverage.

Frequently asked questions