Does GAP insurance coverage assist to repay your automotive mortgage? Sure.
Does it pay for a brand new engine? No.
Positive, it will be good if GAP insurance coverage lined each single automotive expense, but it surely doesn’t work like that.
It does nevertheless cowl your, uh, rear finish in case your automotive is totaled or stolen and you continue to owe cash in your automotive mortgage. GAP insurance coverage could make the distinction between inconvenience and monetary catastrophe.
Let’s take a better have a look at what it does and doesn’t cowl.
What Is GAP Insurance coverage?
GAP insurance is elective car insurance that may assist repay your mortgage in case your automotive is totaled in an accident or stolen and also you owe greater than the automotive’s depreciated value. So, for those who took out a loan or leased a automotive, and the automotive is totaled or stolen earlier than you’ll be able to repay the mortgage, GAP insurance coverage will cowl the distinction between what you owe on the mortgage and the automotive’s resale worth.
GAP Insurance coverage Protection Examples
Right here’s the way it works. Faux for a minute that you simply’re in a (lined) automotive accident and also you’re not at fault. Your automotive is broken past restore, and you continue to owe $24,000 in your automotive mortgage, however the depreciated worth of your fancy new automotive is simply $20,000.
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When you have GAP insurance coverage on this state of affairs, it is going to cowl the $4,000 hole between what you owe in your automotive mortgage and what your automotive is value after you pay your deductible.
Let’s have a look at one other instance. Suppose you sideswiped a fence inflicting main harm to your leased automotive. The automotive is totaled so that you make a declare in your collision insurance coverage. Your insurance coverage firm agrees to pay you the depreciated worth of the automotive ($18,000) minus your $1,000 deductible.
However wait. What in regards to the cash you continue to owe on the lease? You’ve solely paid six months of the lease up to now, and you continue to owe $22,000. That is when GAP insurance coverage is usually a lifesaver. It is going to pay for the distinction between the quantity you get to your destroyed automotive and your lease steadiness. So, as an alternative of getting a verify out of your insurance coverage firm for $17,000 ($18,000 minus the $1000 deductible), you’ll get $22,000 so you’ll be able to repay your lease.
Now that you recognize what GAP insurance coverage does cowl, let’s dive into what it doesn’t cowl.
What GAP Insurance coverage Doesn’t Cowl
Wouldn’t or not it’s handy for those who might simply pay a minimal month-to-month charge for GAP insurance coverage, and it rescued you financially each time you had automotive hassle? It’s a pleasant dream, however . . . uh, no.
To drive house our level, we put collectively a listing of conditions the place GAP insurance coverage received’t bail you out.
- Couldn’t pay your automotive fee final month? We really feel you, however sorry, GAP insurance coverage can’t assist right here.
- Your “change oil” mild has been blinking without end, you’ve been ignoring it, and now you’ll be able to see smoke coming from below the hood. GAP insurance coverage received’t pay for the brand new engine you now want.
- Haven’t paid your month-to-month automotive lease invoice for six months and the automotive was repossessed? You’re by yourself right here—GAP insurance coverage received’t assist.
- Want a rental automotive whereas yours is within the store? Bummer, however you’ll need to pay for it out-of-pocket (except you will have rental automotive reimbursement—a type of insurance we don’t recommend).
- You bought in an accident and now your automotive is lacking the entrance bumper and has a dented entrance grill. GAP insurance coverage received’t assist right here as a result of the automotive remains to be drivable. Despite the fact that it’s now solely value $18,000, in comparison with the $23,000 it was value earlier than you mangled the entrance finish, that $5,000 oops is on you.
- Received your eyes on a shiny new sedan to exchange your beater? Don’t rely on GAP insurance coverage to provide you with the down fee.
- In case you truly believed the automotive salesman when he bought you an extended warranty, you’ll need to pay curiosity on that guarantee when it’s added to your automotive mortgage. GAP insurance coverage can’t assist right here.
In brief, GAP insurance coverage protection is a good way to guard your cash in case your automotive is ever totaled or stolen and you continue to owe cash in your mortgage. Nevertheless it received’t make it easier to pay for all car-related errors.
FAQs – GAP Insurance coverage Protection
Received lingering questions? Most readers do. We put collectively solutions to distinctive questions on GAP insurance coverage protection.
1. Does GAP insurance coverage cowl detrimental fairness?
Sure. Unfavorable fairness (aka an upside-down mortgage) is one other time period for the hole between what you owe in your auto mortgage and the automotive’s precise worth. GAP insurance coverage covers the distinction between the 2.
2. Does GAP insurance coverage cowl loss of life?
No. GAP insurance coverage can solely be used for losses associated to automobiles. It doesn’t cowl bodily accidents, misplaced wages, medical bills or funeral prices.
3. What does GAP insurance coverage cowl on a leased automotive?
GAP insurance coverage works a lot the identical manner on a leased automotive because it does on a automotive that carries a mortgage. GAP protection for a leased automotive is a signed settlement from the insurance coverage firm to cowl your hole quantity in case your automotive is totaled or stolen. Actually, most automotive dealerships require GAP insurance coverage earlier than they’ll conform to lease a automotive.
4. Does GAP insurance coverage cowl deductible prices?
No. GAP protection doesn’t pay your deductible. So, in case your deductible is $1,000 and the GAP reimbursement quantity is $10,000, your complete reimbursement quantity could be $9,000.
5. Does GAP insurance coverage cowl engine failure?
No. You possibly can solely use GAP insurance coverage in case your automotive is totaled or stolen. You possibly can’t use it for mechanical repairs.
6. Does GAP insurance coverage cowl theft?
Sure. Automobile GAP insurance coverage covers theft. Most insurance coverage corporations require a 30-day ready interval simply in case your automotive is recovered. After the ready interval, your insurance coverage supplier will want a duplicate of the police report earlier than they comply with pay the declare.
7. Ought to I get GAP insurance coverage?
In case you financed your automotive and your mortgage quantity is greater than the automotive’s depreciated worth, sure, we suggest shopping for GAP insurance coverage (however we by no means suggest taking out a automotive mortgage). It’s sometimes cheaper to purchase it from an insurance coverage agent than from a automotive dealership.
Get the Greatest GAP Insurance coverage Protection
In case you nonetheless have questions on GAP insurance coverage protection, we suggest contacting one among our Endorsed Native Suppliers (ELPs).
Not solely will one among our impartial ELP specialists be capable to reply your questions on GAP insurance coverage protection in your space, however they will additionally store round for the very best worth for you.