How Do You Know if You Have Gap Coverage
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| Reviewed by Joel Ohman |
UPDATED: January 21, 2021
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Here'south what you need to know...
- GAP insurance stands for Guaranteed Motorcar Protection. If yous're financing a vehicle or leasing it, you can purchase GAP for extra protection that will assistance pay off your finance contract
- The purpose of the protection is to help the borrower or lessee pay off their loan or pay off their lease when the car is totaled and they owe more than on their contract than the insurer is obligated to pay
- The insurance visitor volition pay the Actual Cash Value of the vehicle and then you must file a claim for through your GAP provider to take the remaining residuum of your contract paid off
At that place's nothing more terrifying than getting into a serious accident.
As your vehicle collides with some other auto, the feeling of being out of control turns your stomach and you lot're left bracing for the touch on that you lot can't stop.
If you're lucky enough to walk away from the accident without any broken bones or bruises, you can start to worry about your vehicle that didn't fare and so well.
Later you become past the initial daze of it all, you lot realize that the worst of it isn't over. When you lot accept full coverage insurance on a financed vehicle that'south totaled in an accident, in that location's no guarantee that your loan will be paid off.
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When is a vehicle alleged a total loss?
Before yous dive in and find out how GAP insurance works, it's helpful if you know merely what turns a physical damage loss into a total loss.
If your company sends yous a letter or contacts you by phone to notify you that the vehicle is deemed totaled, it means that the insurer has predicted that it will toll more to repair your car than information technology'south worth.
Companies volition send an estimator to you lot to take pictures of your vehicle and to give the adjuster repair estimates.
In one case the adjuster reviews the repair estimates, they will then assess the vehicle's value at the time of the loss.
This is referred to the Bodily Greenbacks Value, which is the replacement cost minus depreciation. Since the Actual Greenbacks Value of your car is the maximum that your carrier volition pay, the machine will be labeled a write-off.
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Why is GAP insurance simply bachelor for leased or financed vehicles?
You lot can't and shouldn't buy GAP insurance on just whatever vehicle.
This supplemental course of protection is just bachelor when you bulldoze a vehicle that'due south currently financed or leased.
That'southward because the entire purpose of Guaranteed Auto Protection is to fill in the gap that's present between your machine insurance policy and what's due on your contract.
Why do many borrowers owe more on their loan than their vehicle is worth?
When you finance a motorcar, you pay principal and interest each month in the form of a car payment.
While some of the payment pays down the balance of the principal that was financed, another portion of the payment goes to interest charges.
Every bit your automobile depreciates in value, the gap between the residue of your loan and the value of your car grows.
A huge reason that borrowers are often upside down on their loans is when they roll negative disinterestedness over into a new car purchase. This disinterestedness will piece of work against y'all if you ever have a serious loss.
Information technology can also affect you if you lot don't put downwardly money to buy the car and you take out a long loan term. In these scenarios, having GAP is a must.
Filing a Full Loss Claim
After you lot have a loss where your vehicle sustains damage, it's your duty to get to rubber before doing anything else.
In one case yous are safe, you lot can worry nigh calling the insurance company to start the claims process.
Your own insurer will investigate the loss, contact the other parties involved, and determine the value of your car.
Every bit long as the total loss threshold is exceeded, you'll receive a settlement offer that includes an amount for the Actual Cash Value, projected titling fees, projected registration fees, and projected sales revenue enhancement fees for a new vehicle.
The insurance adjuster doesn't wait at your loan residuum when negotiating how much the carrier will pay under the comprehensive or collision coverage.
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Paying Your Lender
Y'all're required to list the lender that's financing the vehicle as an additional insured and loss payee. This requirement protects the lender from borrowers running off with insurance settlement checks after the collateral on the loan is inoperable.
When your check for the total loss value is issued, it will exist made out to you and the lender.
You need to take this settlement check to the lender to accept it applied to the rest of your loan.
If the value of your auto is higher than the loan balance, y'all'll get the deviation in a refund. If there is still money due on your loan after the check is applied, you are responsible for paying it unless you take GAP coverage.
Filing a Claim Against Your GAP Coverage
When yous have GAP insurance, that GAP between the loan balance and the amount of your total loss cheque is covered.
How you file your claim for the benefit depends on where you lot purchased your coverage.
If you purchased your coverage through your car insurance provider, you will submit proof of the residual of your loan to your claims adjuster.
If yous bought coverage through your lender or the dealer, y'all need to get your paperwork out so that you can find your policy number.
Then, y'all can contact the carrier that offers the standalone coverage to file a separate claim.
The bank check for the payoff balance will and so exist issued to the finance company.
Is GAP Insurance Worth the money?
No 1 wants to full their vehicle, but if yous accept a total loss in a financed car you lot desire to be sure that you have GAP insurance.
If you lot don't have GAP coverage, it's time to get quotes from insurance carriers. Log on to an online rate comparison site and offset comparing today.
Enter your zip code below to observe gap coverage that works for yous!
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Source: https://www.carinsurancecomparison.com/how-does-gap-insurance-work-after-totaling-a-car/
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