Gap Insurance: Available In New York?

Yes, gap insurance is available in New York. In New York, gap insurance is defined as insurance that covers the gap amount payable upon the total loss of personal property, which is the subject of a lease or loan or other credit transaction occasioned by its theft or physical damage. The New York State Insurance Department has issued opinions and guidance on gap insurance and gap waivers, outlining the rights and responsibilities of lessees and creditors in the event of a total loss of a motor vehicle.

What is gap insurance?

Gap insurance, or Guaranteed Asset Protection (GAP) insurance, is an optional form of financial protection for drivers. It covers the difference between the amount owed on a financed vehicle and its actual cash value (ACV) in the event that it is stolen, damaged beyond repair, or otherwise rendered a total loss. This type of insurance is particularly relevant for new vehicles, which can depreciate in value by as much as 20% within the first year of ownership.

In the event of a total loss, standard auto insurance policies will typically only cover the depreciated value of the vehicle. Gap insurance, as the name suggests, covers the 'gap' between this depreciated value and the amount still owed on the vehicle. This can be especially important if the loan balance is higher than the value of the vehicle, as the policyholder will be protected from having to pay back the loan on a vehicle they no longer possess.

Gap insurance is available from a variety of sources, including car dealerships, lenders, and auto insurance companies. It is worth noting that car dealerships and lenders may charge more for gap insurance than a standard auto insurance provider, and adding it to a loan could result in paying interest on the insurance.

While gap insurance is usually optional, it may be required by lenders if a vehicle is leased or if certain other conditions are met. It is important to note that gap insurance does not cover repairs, accidents, or other damages, and it will not cover the cost of purchasing another vehicle. Additionally, it is typically only applicable to brand new vehicles or models less than a year old.

When is gap insurance worth it?

Gap insurance is generally recommended for new vehicles in the following circumstances:

• The auto loan has a length of five years or longer.
• The loan has a high-interest rate because the principal on the vehicle will take longer to pay down versus the depreciation.
• You made a low down payment.

In these cases, gap insurance may be a good idea. It's also worth considering if you've bought a vehicle that depreciates quickly, such as if you paid above the manufacturer's suggested retail price (MSRP) and didn't put anything down.

You can calculate the potential value of gap insurance by estimating your car's value using Kelley Blue Book, reviewing your loan terms, and calculating how much you'll pay in gap coverage. Compare your car's value with how much you'll owe in payments—the difference is the amount that gap coverage protects you from having to pay.

Gap insurance is also worth considering if your lease requires it. Some lease providers may include gap insurance in the price of the lease.

However, gap insurance won't be necessary if you made a large down payment, had a short initial loan term (three years or less), or have a sufficiently funded emergency fund.

When is gap insurance not worth it?

Gap insurance is generally not worth it in the following scenarios:

• When a large down payment has been made: If you've made a substantial down payment on your vehicle, you may not need gap insurance. A large down payment reduces the gap between the amount owed on the loan and the vehicle's value, minimizing the risk of being upside down on the loan.
• Short loan term: If you have taken out a loan with a term of three years or less, gap insurance may not be necessary. Shorter loan terms result in faster equity buildup, reducing the likelihood of owing more than the car's value.
• Vehicle holds its value: If you own a vehicle that historically holds its value better than average, gap insurance may not be worth it. Such vehicles are less likely to depreciate rapidly, reducing the risk of negative equity.
• Comprehensive insurance coverage: If you have comprehensive insurance, which covers various unexpected events such as vandalism and floods, you may not need gap insurance. However, comprehensive insurance only pays out the actual cash value of the car, so gap insurance can still be beneficial if you want protection against the gap between the insured value and the loan amount.
• Affordable to cover the gap: If you have sufficient savings or alternative insurance coverage to cover the gap between the insured value of the car and the loan amount in the event of a total loss, then purchasing separate gap insurance may not be necessary.

It is important to note that the decision to opt for gap insurance depends on various factors, including the cost of coverage, the terms of your loan or lease, and the specific circumstances of your vehicle purchase. It is always a good idea to review your loan or lease agreement, compare insurance options, and assess your financial situation before deciding whether or not gap insurance is worth it for your specific needs.

Where can you buy gap insurance?

Gap insurance is available from a few sources, including car insurance companies, car dealerships, and lenders. It is also offered by companies that provide stand-alone gap insurance policies.

It is worth noting that some auto insurers, like Geico, do not offer gap insurance. If you are considering purchasing gap insurance from a car dealership, be aware that it can be more expensive if the cost of the coverage is bundled into your loan amount, resulting in interest charges on your gap coverage. On the other hand, buying gap insurance from an insurance company may be more affordable, and you won't incur interest charges on the coverage.

Some of the car insurance companies that offer gap insurance include:

• Allstate
• Progressive
• Nationwide
• AAA
• Esurance
• USAA
• Travelers
• The Hartford
• Liberty Mutual

When considering where to buy gap insurance, it is advisable to compare quotes from multiple sources to ensure you get the best deal.

How do you file a claim?

To file a gap insurance claim in New York, you must first contact your insurer and provide documentation that shows the car's value and its coverage details. You may be able to file a claim in person, over the phone, or online, depending on the insurance company.

• A copy of your original gap contract, which is available from your gap insurance provider.
• The original sales agreement from the dealership where you purchased your car.
• The manufacturer's invoice or another document showing the vehicle's original value, available from the dealership.
• The financing contract for the lease or loan, available from the dealership, bank, or credit union that holds your lease or loan.
• A payment history for the lease or loan, available from the dealership, bank, or credit union.
• A valuation report from your standard insurance company.
• A copy of the check from the insurer paying for the total loss, available from your standard insurance company.
• An insurance settlement statement breaking down the amount on the check, available from your standard insurance company.
• A police report, available from your local authorities.

Although these documents are frequently required, each insurer has slightly different instructions for filing a gap claim. Most providers include lists on their websites, and you can always contact your gap insurer to verify that you have everything you need. Additionally, make sure that your gap insurance provider has your current contact information.

Most gap insurers will send a check, usually directly to the auto lease or loan provider, within four to six weeks if your claim is accepted. However, you can expedite the process by promptly submitting any additional paperwork requested and by following up with your insurer with any questions or to check on the status of your claim.

Frequently asked questions