Where Can I Purchase Coverage Gap Insurance?

Where Can I Purchase Coverage Gap Insurance?

Where you buy gap insurance could have a big effect on your finances.

If you are leasing a vehicle or are upside-down on your auto loan, gap insurance might be a handy way to protect yourself against any out-of-pocket charges that may arise. Standard auto insurance settlements frequently fall short in the event of a total loss, leaving a gap between the amount you receive from the insurer and the amount you owe the leasing company or lender. In some cases, this gap can be bridged by purchasing additional coverage. The moniker “gap insurance” comes from the fact that it helps bridge the gap.

You can shop for the coverage you require at a car dealership, with your current auto insurance carrier, or with other auto insurance providers. All of these options are available to you. But if you want to choose the most affordable option, you need to carefully compare the pros and cons of each gap insurance company.

Key Takeaways

  • Gap insurance covers the difference between the amount that your normal insurance policy pays out in the case of a catastrophic loss and the amount that you still owe to your lender or leasing company.
  • You can purchase gap insurance from a car dealership, your existing auto insurance provider, or from one of the many other companies that offer auto insurance.
  • Check your contract to be sure, but gap insurance is usually an extra that you can choose to buy when you buy a car, but it is a requirement when you lease a car.
  • Instead of buying gap insurance from the dealer, it would be better for you to shop around and get multiple quotes so you can find the best deal.

What exactly does “gap insurance” mean?

Gap insurance covers the difference between the amount that your normal auto insurance pays out in the event of a total loss and the amount that you still owe to your lender or leasing company. Gap insurance is a sort of auto insurance. Normal collision and comprehensive coverage will only pay out the car’s actual cash value (ACV) at the time of the loss, no matter how much you still owe on your loan or lease. In many cases, you may need to pay extra for this coverage.

Because newer automobiles lose value at a far faster rate than older ones, it is not uncommon for buyers to find themselves upside-down on their auto loans for a few years. This means that they owe more money than the vehicle is currently worth. Gap insurance protects you against having to pay a lump sum in the event that your car is stolen or written off during the coverage gap.

A number of different insurers offer equivalent protection under a variety of different brand names. Progressive, for example, offers loan/lease payback coverage, which achieves the same goal but is limited to covering only 25% of the value of your vehicle.

 How Coverage Gap Insurance Operates

Contacting your gap insurance provider as soon as you realize there is a difference between the settlement you receive from your standard auto insurance provider after a total loss and what you owe your lender or leasing company is something you should do as soon as you realize there is a gap in coverage. After that, it will investigate the claim. After getting your permission, the insurance company will pay the rest of what you owe, up to the policy’s maximum limit.

In most cases, the deductible on your normal insurance policy will not be covered by gap insurance. However, some gap insurance policies include deductible coverage; therefore, it is critical to review the terms of your policy or ask your provider about this.

Let’s have a look at an example, shall we? If you came out first thing in the morning and discovered that your car was gone, you would immediately report it stolen. In the event that you are unable to retrieve it, you might submit a claim to your insurance company in order to recoup the expenses. However, your primary insurer is only obligated to reimburse you for the actual cash value of the car at the time of the accident or theft.

Let’s say the car costs you $30,000 to purchase, and you still have a loan balance of $25,000. However, if the ACV of your vehicle is $20,000, then all that you will receive from your primary auto insurer is that amount; this will leave you with a $5,000 shortfall. When this happens, you should contact the company that provides your gap insurance and make a claim for the additional $5,000.

Where to Look for Coverage When You Need Gap Insurance

After suffering a total loss, having gap insurance can assist in mitigating the danger of further financial hardship. If you have an upside-down automobile loan or lease, you won’t have to worry about owing more money than your insurance company is willing to pay out. But where can you go to enroll in a plan that covers you? The available choices are as follows:

Purchasing Gap Insurance Through Your Current Insurance Provider

You can inquire about gap insurance with the company that supplies your current auto insurance policy to determine whether or not the company offers such coverage. Working with just one auto insurance provider for all of your coverage requirements may make things simpler. However, only a few insurance providers offer gap coverage; for instance, Geico does not include this protection in its offerings.

Even if your current insurance provider offers gap coverage, it is still a good idea to compare rates from at least two or three other insurance providers to be sure you are getting a reasonable offer.

Purchasing Gap Insurance Via the Internet

How do you go about comparing different gap insurance policies? It is simply because the websites of many providers of gap insurance list the policies they offer. However, the specifics and availability of this coverage may vary depending on the state in which you live. AAA, Nationwide, Travelers, and State Farm are just some of the well-known firms that offer gap insurance online. If you want to find the greatest offer possible that caters to your requirements, you should get a few quotations and compare them side by side.

Purchasing Gap Insurance From the Automotive Retailer

It’s likely that a salesperson at the dealership where you purchased or leased your vehicle pitched gap insurance to you at some point. The majority of the time, dealers will make a vehement recommendation that you purchase the item from them, and may provide a variety of justifications. But before you buy any kind of insurance, you should do some comparison shopping to make sure you get the policy that gives you the best value in terms of both price and coverage.

 Should You Get Gap Insurance Even If You Don’t Have A Gap?

Your particular circumstances will determine whether or not you are required to get gap insurance. In most situations, when you lease a vehicle, you are required to have gap insurance, but when you finance a vehicle, you are not. But it’s possible that there will be an exception, so you should read your agreement very carefully.

If getting gap insurance isn’t needed, the next thing to ask yourself is whether or not you should obtain it nonetheless. In order to make a decision, it is essential to consider what would take place in the event that you did not have this coverage and that your vehicle was stolen or wrecked. In order to answer that question, you will need to take into account both the vehicle’s actual cash value (ACV) and the amount that is still owed on the loan.

Although the rate of depreciation varies by make, model, and year of production, brand-new automobiles typically lose roughly 60% of their value within the first five years of ownership.

It is recommended that you maintain gap insurance until the amount that you owe on the vehicle is equal to the value of the vehicle. You should also think about other aspects, such as your past driving record and the rate of violent crime in the area you live in.

 There is a possibility that the cost of gap insurance will be rolled into your lease or financing agreement by certain dealerships and finance companies. Before acquiring additional coverage, you should make sure you have carefully read the agreement.

Comparing Gap Insurance to Coverage for a Loan or Lease

There are several financial institutions that provide loan/lease payback coverage, which is comparable to gap insurance but may have some significant distinctions. Loan and lease coverage functions similarly to gap insurance in that it helps pay the difference between what you receive from your insurer and what you still owe on your lease or loan.

 Having said that, it is absolutely necessary to examine the particulars in great depth because the loan/lease coverage may include limits or other variations in coverage. Progressive, for example, will only pay up to 25% of the value of your vehicle for loan/lease payment coverage. If your balance is greater than 25%, you will be required to pay some of the fees out of your own pocket.

Tips for Cutting Costs on Gap Insurance

If you need gap insurance, the best way to save money is to avoid purchasing it through the dealer. This is the number one strategy to cut costs. If you purchase gap insurance from the dealer, the cost will normally be rolled into your lease or loan, which means you will most likely pay interest on it. If you do not purchase gap insurance from the dealer, the cost will be paid in full at the time of purchase.

 If you purchase gap insurance from an insurance company, you will not have to make interest payments on the cost of coverage. This will allow you to save money. You can also cancel the coverage at any time if you decide you don’t need it anymore, and you can easily shop around to find the best deal.

 It is essential that you determine whether or not you really require gap coverage before you go ahead and invest in this kind of insurance. Make sure you check with your insurance provider to determine whether you already have gap coverage by purchasing it separately. Next, run the numbers to see whether or not you would be responsible for a significant payment in the event of a total loss. Cancel your gap insurance coverage if you reach a point when the premiums you pay are greater than the benefits you receive from having it.

Questions That Are Typically Asked (FAQs)

What is the cost of gap insurance?

The price of gap insurance will vary depending on where you purchase it and how your current financial situation is set up. According to the findings of a study conducted by an insurance company, purchasing gap insurance through a car dealership can cost between $400 and $900, whereas adding gap insurance to an existing auto insurance policy can cost between 5% and 7% of the premiums for comprehensive and collision coverage, which is a significant discount. However, the cost will vary depending on a variety of factors, including your age, driving record, state of residency, and more. This is true for all types of insurance.

How can I determine whether or not I have gap insurance?

If you are unsure whether or not you have gap insurance, the first place you should look is the purchase or lease agreement that the dealership provided you with. If you purchase gap coverage from the dealership, it will be included as a line item on the contract that you sign for the vehicle. Next, contact your existing car insurance provider and inquire as to whether or not you are covered by a gap insurance policy. In the end, if you have signed up with a different insurer, you can check your records or get in touch with them to find out if your policy is still in effect.

How can I cancel gap insurance?

You can terminate your gap insurance coverage by sending a cancellation request to your policy provider after contacting them. However, before you proceed, you should examine the terms of your purchase or lease agreement to make sure that gap insurance is not required. Also, make sure that you have a good understanding of the fees that would be incurred by you in the event of a total loss if you do not have this coverage. If you cancel your gap insurance policy after having paid premiums that you won’t use, you may be eligible for a refund of some of the money you spent on the policy.

Leave a Reply