| GAP Auto Insurance Coverage |
Gap Auto Insurance Coverage - What Does Gap Insurance Cover?
What Does Gap Insurance Cover?
GAP auto insurance coverage is one the most necessary, yet least understood insurance products
available to vehicle owners.
It's purpose is simple: If your car is totaled, gap insurance will cover the difference between what
your insurance company says your car is worth (actual cash value) and what you still owe on your
loan or lease.
Typically, losses due to the following events are covered: Fire, Theft, Vandalism, Accident, Flood,
Tornado, and Hurricane. Most gap auto insurance policies will also cover your insurance
deductible.
Since most new cars depreciate by as much as 30% in the first year, the amount the insurance
company pays to settle your claim is often considerably less than the actual amount you still owe
on your loan, or the amount due for a lease payoff.
The loss from this financial shortfall, plus the amount of your insurance deductible is the “Gap”
you could be left owing. This amount could easily run as much as four or five thousand dollars.
If a loss occurs, gap auto insurance will pay the difference for you.
I can tell you from personal experience, the last thing you need is having to buy a new vehicle
while continuing to make payments on a "phantom" vehicle you no longer own.
A small investment in gap auto insurance coverage will protect your hard earned financial status,
prevent unnecessary financial hardship, and most importantly, give you peace of mind.
Gap insurance coverage is also available for motorcycles, RV's, campers, and trailers.
Find Out If You Have A Gap In Your Insurance Coverage
You can quickly find out if you have a gap in your auto insurance coverage simply by subtracting
the actual cash value (ACV) of your car from the loan balance, or payoff amount, of your vehicle.
Here are the steps; the whole process takes only 6 or 7 minutes.
Find the Payoff Amount: Login to your online account at the finance company or bank that
services your loan and look for the balance due on the loan or the payoff amount and write it
down. If you can't find the information online then call the loan company and ask for the payoff
amount.
Determine the Actual Cash Value: Insurance companies use a variety of methods, much like home
appraisers, to determine the actual cash value of your vehicle. The easiest way to approximate
your vehicle's ACV is by using the Kelley Blue Book Trade In Value estimate.
If your car is worth more than the payoff amount you can breath easy because there is no gap.
If the loan balance is more than the ACV, subtract the ACV from the loan amount to find out how
wide the gap is between the two. If you find out you owe only a couple of thousand dollars more
than the car is worth, you could probably skate by without gap insurance. But bear in mind, if
something happened to your car tomorrow, you would still be liable for "only a couple of thousand
dollars." It all depends on your personal financial situation and what you feel comfortable with.
However, if you find out you owe 4 or 5 thousand more than the car is worth, you should
seriously consider adding gap insurance coverage to your policy, or switching to an insurance
provider that does offer gap coverage.
If you think you need gap protection, the Buyer's Guide section of this site will show you the
cheapest (and most expensive) gap insurance providers.
What Gap Insurance Does NOT Cover
The following gap insurance exclusions are fairly standard from policy to policy. Please check with
your insurer to for exact coverage and exclusions.
GAP auto insurance coverage is a powerful and inexpensive tool for leveling the financial playing
field between consumers and lending institutions. Spending a few minutes of your time now
getting a quick gap auto insurance quote online could save you thousands down the road.
GAP auto insurance coverage is one the most necessary, yet least understood insurance products
available to vehicle owners.
It's purpose is simple: If your car is totaled, gap insurance will cover the difference between what
your insurance company says your car is worth (actual cash value) and what you still owe on your
loan or lease.
Typically, losses due to the following events are covered: Fire, Theft, Vandalism, Accident, Flood,
Tornado, and Hurricane. Most gap auto insurance policies will also cover your insurance
deductible.
Since most new cars depreciate by as much as 30% in the first year, the amount the insurance
company pays to settle your claim is often considerably less than the actual amount you still owe
on your loan, or the amount due for a lease payoff.
The loss from this financial shortfall, plus the amount of your insurance deductible is the “Gap”
you could be left owing. This amount could easily run as much as four or five thousand dollars.
If a loss occurs, gap auto insurance will pay the difference for you.
I can tell you from personal experience, the last thing you need is having to buy a new vehicle
while continuing to make payments on a "phantom" vehicle you no longer own.
A small investment in gap auto insurance coverage will protect your hard earned financial status,
prevent unnecessary financial hardship, and most importantly, give you peace of mind.
Gap insurance coverage is also available for motorcycles, RV's, campers, and trailers.
Find Out If You Have A Gap In Your Insurance Coverage
You can quickly find out if you have a gap in your auto insurance coverage simply by subtracting
the actual cash value (ACV) of your car from the loan balance, or payoff amount, of your vehicle.
Here are the steps; the whole process takes only 6 or 7 minutes.
Find the Payoff Amount: Login to your online account at the finance company or bank that
services your loan and look for the balance due on the loan or the payoff amount and write it
down. If you can't find the information online then call the loan company and ask for the payoff
amount.
Determine the Actual Cash Value: Insurance companies use a variety of methods, much like home
appraisers, to determine the actual cash value of your vehicle. The easiest way to approximate
your vehicle's ACV is by using the Kelley Blue Book Trade In Value estimate.
- Login to your Kelley Blue Book account. (Sign up is free if you don't have one).
- On the home page click the Used Cars tab at the top of the page. On the Used Cars page
select Year > Make > Model > click Go.
- On the next page select Trade-In Value. This takes you to the Select A Trim box where you
select the model of your car.
- This in turn takes you to Select Equipment form where you fill the vehicle's mileage and
check off the relevant optional equipment. Click continue and choose what condition you
think your car is in. You will then get three value estimates of your car based on Excellent,
Good, or Fair condition.
- For our purposes here, the ACV will be the dollar amount that matches the condition you
chose for your car.
If your car is worth more than the payoff amount you can breath easy because there is no gap.
If the loan balance is more than the ACV, subtract the ACV from the loan amount to find out how
wide the gap is between the two. If you find out you owe only a couple of thousand dollars more
than the car is worth, you could probably skate by without gap insurance. But bear in mind, if
something happened to your car tomorrow, you would still be liable for "only a couple of thousand
dollars." It all depends on your personal financial situation and what you feel comfortable with.
However, if you find out you owe 4 or 5 thousand more than the car is worth, you should
seriously consider adding gap insurance coverage to your policy, or switching to an insurance
provider that does offer gap coverage.
If you think you need gap protection, the Buyer's Guide section of this site will show you the
cheapest (and most expensive) gap insurance providers.
What Gap Insurance Does NOT Cover
The following gap insurance exclusions are fairly standard from policy to policy. Please check with
your insurer to for exact coverage and exclusions.
- Cars that are not covered by both comprehensive and collision insurance.
- The outstanding balance from a previous car loan or lease rolled over into the new car loan.
- After market equipment that was not factory installed such as GPS or sound systems.
- Financial penalties and/or security deposits on leased vehicles.
- Unpaid or overdue lease or loan payments.
- The cost for dealer add on products such as extended warranties.
GAP auto insurance coverage is a powerful and inexpensive tool for leveling the financial playing
field between consumers and lending institutions. Spending a few minutes of your time now
getting a quick gap auto insurance quote online could save you thousands down the road.