How Do I Know If I Have Gap Insurance?

how do i know if i have gap insurance

Many new drivers who are purchasing a new vehicle are debating which coverage options to select before finalizing their purchase. If you’re asking yourself, “How do I know if I have GAP insurance cover?” First, let’s address the question, “What is GAP insurance?”

What is Gap Insurance?

Gap insurance covers the difference between the value of your vehicle and the amount you still owe on it. It usually applies if your car is stolen or totaled. In either case, your comprehensive or collision coverage reimburses you for the actual cash value (ACV) of your vehicle, less your car insurance deductible. The difference between the vehicle’s ACV and the amount you owe on it may then be covered by your gap insurance.

It’s critical to remember that gap insurance only covers the difference between what you owe and what the vehicle is worth. It does not offer any benefits for repairs, damages, or injuries. In order to add gap coverage to a car insurance policy, you must also have comprehensive and collision coverage.

How Do You Know If You Have GAP Insurance?

GAP insurance is not required by insurance in the same way that liability insurance is. If you want GAP insurance for your vehicle, you must request it or seek it out and add it to your existing insurance coverage. If you lease a vehicle, you may be required to purchase GAP insurance, which should be specified in your lease agreement. So, if you’re wondering, “How do I know if I have GAP insurance?” your best bet is to check with your insurer or the dealership where you bought/leased your vehicle.

GAP Coverage Should Be Checked On Your Insurance Statement.

If you’re wondering, “How do you know if you have GAP insurance?” consider whether you inquired about GAP insurance when purchasing your vehicle’s insurance policy. If you did not inquire, you most likely do not have GAP insurance coverage. If you’re not sure whether you asked or not, you should be able to contact your insurer or look over your vehicle purchase agreement to see if you have GAP coverage.

However, if you’re leasing or financing a vehicle, don’t automatically assume you must purchase GAP insurance. Some leasing and loan companies will include a GAP Waiver Provision in their borrowers’ and lessees’ policies. The GAP Waiver Provision will cover the “gap” between what you owe and what the insurance company pays out.

How To Purchase GAP Insurance

If you’ve checked with your insurer and want to purchase GAP insurance, Springfield makes it relatively simple. You can get GAP insurance from your current provider, an online insurer that specializes in GAP coverage, or the Huber Heights dealership where you bought or leased your vehicle.

The Benefits and Cons of Gap Insurance

Gap insurance can provide significant protection in certain situations, but it is an additional cost to consider. If you are not required to purchase gap insurance but have the option, here are some things to think about:

Pros

  1. You can walk away from an accident with less financial burden if you have gap insurance.
  2. You may be able to purchase a more expensive vehicle with less concern.
  3. The annual cost is relatively low, frequently less than $100.

Cons

  1. At some point, the difference between what you owe and the car’s value will be so small that it may no longer be worth having.
  2. It is an additional cost in addition to monthly payments and routine maintenance.
  3. It may not be necessary if you pay a low starting price.

Where Can you Get a Gap Insurance Policy?

Most major car insurance companies, including State Farm, Progressive, Allstate, Esurance, Farmers, Travelers, Nationwide, 21st Century, and USAA, offer gap insurance. Most companies require drivers to have comprehensive and collision coverage in order to qualify for gap insurance, and some may have additional special conditions drivers must meet in order to qualify.

Some car dealerships offer standalone gap insurance coverage if you only want to buy gap insurance. However, most of the time, insurers offer lower gap insurance rates than dealers. While car dealers may tell you that you must have gap insurance or that you must purchase it from them, it is entirely up to you to decide whether or not to purchase gap insurance.

What Does Gap Insurance Cover (and what does it not)?

Gap insurance can be a valuable addition to your car insurance coverage, but it only protects you in certain situations. Here are some examples of when gap coverage will (or will not) protect you:

Is theft covered by gap insurance?

Yes. If you are the victim of car theft, gap coverage will pay the difference between your comprehensive coverage and the value of your vehicle.

Is Gap Insurance Available for a Car that has Been Totaled in an Accident?

Yes. Gap coverage will kick in if your vehicle is damaged beyond repair.

Is Gap Insurance Going To Cover Me If My Car Isn’t Totaled?

No. Gap insurance kicks in only if your car cannot be repaired or is prohibitively expensive to repair.

Is My Deductible Covered by Gap Insurance?

No. Even if you have gap insurance on your vehicle, you will still be responsible for the comprehensive or collision deductible.

Is Bodily Injury or Death Covered by Gap Insurance?

No. Gap insurance only applies to vehicle damage and does not cover medical expenses, funeral costs, or lost wages.

Who Should Purchase Gap Insurance?

Not every driver is eligible for gap insurance, and not every eligible driver should obtain it.

Gap insurance is only available if you purchased your car with a loan or leased it. If you own your vehicle outright, you don’t need to worry about gap coverage.

Even if you financed your car, you only need gap coverage if the amount you owe exceeds the value of the vehicle. The best way to determine whether you need gap coverage is to calculate the cash value of your vehicle and subtract it from the amount you owe.

You won’t be able to determine the exact amount your insurance company uses for your vehicle’s actual cash value, but you can get a rough estimate by visiting a local appraiser or looking it up in Kelley Blue Book.

A 2017 Mini Cooper, for example, has a Kelley Blue Book value of around $13,000, according to our research. If you still owe $15,000 on that car, you’re underwater and could benefit from gap coverage.

Calculating the gap between the value of your car and what you owe is the best way to determine whether you require it. You may also require gap coverage if any of the following situations apply to you:

#1. Your lease or loan may require it:

Your leasing or financing company may require gap insurance to protect you in the event of a total loss. However, just because it’s required doesn’t mean it’s part of your loan or lease, and you may be able to find cheaper coverage elsewhere.

#2. You chose a long lease or a low down payment:

With a low down payment or a longer lease, your car is likely to lose value faster than you are paying it off, particularly in the first few years of ownership.

#3. You own a high-end or luxury vehicle:

Luxury cars depreciate faster than regular vehicles, so if you bought a Cadillac or Lexus, your loan amount is more likely to exceed the car’s value.

#4. You drive your car a long distance:

While every car loses value the moment you drive it off the lot, driving a long distance in a new vehicle reduces the value of the car much faster. The more you drive the car, the less it is worth.

You probably don’t need gap insurance indefinitely. Once you’ve paid off the loan to the point where it’s worth more than you owe, you should cancel the gap coverage, assuming the terms of your lease allow it. In the event that your car is totaled, having gap insurance will not result in any additional payments.

Is it Worthwhile to Purchase Gap Insurance?

Gap insurance is worth purchasing if the cost isn’t prohibitively expensive and you could end up with a large bill to pay off a car you no longer own. It’s critical to do the math and figure out how much you’re “upside-down” on your current auto loan. In the event of an accident, if your loan payment is close to the actual cash value of your vehicle, you may receive little to no payment.

However, if the value of your car is significantly less than the amount still owed on it, gap insurance is well worth the usually low cost.

Many policyholders are unwilling to purchase additional coverage if it is not required. Remember that as your car depreciates and you continue to make monthly loan payments, your “gap” shrinks. To determine the value of your vehicle, consult a resource such as Kelley Blue Book.

How Much Does Gap Insurance Cost, and Which Companies Provide It?

Most major car insurance companies provide some form of gap insurance, though many have restrictions on which vehicles they will insure. Geico is the only major insurer that does not provide any gap coverage.

Gap insurance is typically not very expensive through an insurance company, so we recommend that drivers who would benefit from the coverage consider purchasing it.

InsurerDoes it offer gap insurance?Limitations
State FarmYesOnly vehicles financed through State Farm Bank
ProgressiveYesUp to 25% of actual cash value (lease/loan coverage)
AllstateYesNew vehicles only
EsuranceYesUp to 25% of actual cash value (lease/loan coverage)
FarmersYesNew vehicles only
TravelersYesNew vehicles only
NationwideYes
21st CenturyYesOnly available in AZ, CO, ID, IA, KY, MT, NM, OR, NE, TN, UT, WA, and WI
USAAYesOnly vehicles financed with a USAA auto loan
GeicoNo

Comparing rates is frequently the most effective way to save money on car insurance coverage.

The Cost of Gap Coverage

We obtained quotes from Progressive and Esurance to determine how much gap coverage will cost you. In all cases, we found gap insurance to be reasonably priced, with monthly premiums averaging only a few dollars. Furthermore, neither insurance company requested the remaining balance of our loan, so the price is the same regardless of the size of your gap.

ProgressiveEsuranceKelley Blue Book value
2017 Camaro convertible$5.83/month$7.67/month$16,500
2017 Mini Cooper$4.50/month$7.50/month$13,000

The vehicles chosen are base trim levels in good condition with 15,000 miles driven.

How to Work Out Gap Insurance

To calculate your gap insurance, simply subtract the current value of your vehicle from the outstanding balance of your loan. You should be able to consult your lender to determine how much you still owe, and Kelley Blue Book is a useful tool for determining the value of your vehicle.

You can see how gap insurance can potentially save you thousands of dollars if your car is totaled or stolen in this example:

Actual cash value of your vehicle [A]$15,000
The amount you owe on your auto loan [B]$20,000
Gap insurance covers [B – A]$5,000

It’s worth noting that the amount gap insurance covers decreases over time. If your lender allows it, it may be worth the risk to discontinue coverage at some point.

How to Get a Refund for Gap Insurance

Once you’re no longer underwater, you don’t need gap insurance. You can cancel gap coverage once you have paid off enough of your vehicle’s purchase price that the amount you owe is less than the car’s value.

If you paid for coverage in advance, you will be reimbursed for any unused premiums. For example, if you pay for six months of gap insurance but your car is paid off three months later, you can get a refund for the remaining three months.

How Long Does Gap Insurance Take To Pay Out?

The time between an accident and a gap insurance payout can be as little as five days, in theory, depending on where you live, but it is far more likely to take several weeks, if not more than a month. Different states have different laws, and the process is complicated.

Generally, it takes up to 30 days for an insurance company to declare a vehicle a total loss, though it can take longer. The insurer will begin processing the gap payment once it has made a decision.

Throughout the process, you should consult with both your insurer and your lender or lessor to get an idea of how long it will take. You must first determine how the timing works between your next payment and when the gap insurance payment begins to cover the loss.

How Do I Know If I Have Gap Insurance FAQ’s

Do you need gap insurance if you have full coverage?

Yes, you need gap insurance if you have full coverage but still owe money on a car loan or lease. Gap insurance is required even if you have full coverage because full coverage does not cover the difference between what you owe on a loan/lease and the car’s actual cash value, whereas gap insurance does.

Is gap insurance through the bank or insurance?

Gap insurance can be obtained from a variety of sources, the most common of which is the dealership or lender that is financing your vehicle, or directly from an auto insurance provider. When you buy gap insurance from a dealership or lender, it is usually more expensive than when you add it to your car insurance policy.

How Does GAP insurance work if my car is totaled?

If your vehicle is totaled or stolen, gap insurance will pay the difference between the vehicle’s actual cash value (ACV) and the current outstanding balance on your loan or lease. It may also cover your regular insurance deductible.

How much does gap insurance cost monthly?

When you add gap insurance to your car insurance policy, it costs about $3 per month. In most cases, a gap insurance policy will cost between $400 and $700 if purchased from a car dealership.

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