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Honda GAP Insurance

Accidents can happen anywhere and at any time. The worst thing that can happen is a total loss, which means that you will not get reimbursed what you owe on your vehicle. What GAP insurance does is cover what is owed on the remainder of the loan, which can end up with you getting another vehicle after an accident.

In the event of your Honda being totaled by an adjuster, you may find yourself battling with the insurance agencies over getting another vehicle or getting a fair value from the car itself. What GAP does is covers you on the rest. Think of it as an extra benefit to having vehicle insurance.

Here are some important things to know about GAP insurance for your Honda:

  • Auto Insurance – Having insurance is a good thing. Besides, you need it to cover you when and if something happens to your car. GAP insurance, on the other hand, covers the GAP that insurance companies won’t cover. You can purchase GAP insurance from the dealership itself. So when you are at a dealer buying a new Honda, consider purchasing this insurance.
  • What It Covers – GAP insurance covers losses and theft. What this means is that if you have totaled your new car or if someone has stolen it, then you are completely covered. You may want to ask your dealership what else it may cover, but these are the two main things. You may think that nothing will ever happen, but it does and always when you are not ready.
  • Is It Required? The answer to this is no. You don’t need this if you think that it won’t happen to you or just can’t afford it at the time. But, it’s something to really consider. You never need extra coverage, but it’s a good idea to have it for when the worst happens.
  • Do All Cars Come with GAP Insurance? They actually do not. You will not automatically have it stapled to your loan, so you will have to ask in advance before making the purchase. They will place it on your loan and add it to your monthly payments. As mentioned earlier, you really may want to consider purchasing this as it is an important thing to have.
  • Can I Purchase GAP Insurance from My Insurance Provider? Yes, you can actually purchase this from your insurer. They really don’t mention it because if you have all of your bases covered, then they feel that is adequate enough. Call your insurer and ask them to give you a quote on GAP as it may save you from a total loss.

GAP insurance for your Honda is not an essential, but something to really consider. You will need it for when and if you suffer a total loss on your vehicle or theft. Either way, you’ll want to be covered on all sides of your insurance. The insurance only costs a few dollars more and will give you a sense of security.

Protect Yourself with Automobile GAP Insurance

Considering getting automobile GAP insurance? If so, you may already be aware of what this type of auto insurance protection can do for you. If not, it is a good idea to get an understanding of what GAP insurance does and covers.

To start with, GAP car insurance is generally something you may need if you are financing a new vehicle. There are other circumstances in which you may need a GAP auto insurance policy, but this is the most common scenario.

automobile gap insurance

What car GAP insurance coverage does is protect you from being financially liable should your new car be stolen or wrecked and totaled out completely. Totaled out is usually when the damage to a vehicle is so severe it would be cheaper to replace it than to pay to repair it. In some cases, this can be even from something just cosmetic such as extreme hail damage. The difference comes in when you look at the amount of what your standard auto insurance policy values your car at and what you owe on it.

How This All Makes Sense

What you may be wondering is why you might need automobile GAP insurance. Almost any time you drive a new car off the lot, it depreciates immediately. What happens is the amount you owe on the car loan is much greater than what any car insurance policy provider would pay out in the event of your new car being totaled out or if it is stolen and not recovered. If there is a deficit in the two amounts, you are responsible for paying this amount.

In other words, the difference between what the car insurance company will pay and what you owe is still yours to cover. You will be paying this amount out of your own pocket even though you won’t have a new car, or any car, to drive. This amount can easily be thousands of dollars. The worst part is most people assume they have insurance coverage for this, but don’t actually have this coverage. Do not wait until it is too late to find out if you have all the coverage you need, especially on a financed car.

Protecting Yourself

The majority of lenders for car loans require drivers to have GAP insurance on their policy. However if you do not have the proper amount of coverage, your lending institute may tack this type of policy coverage on without you realizing it. When you do find out, is at the end of your loan when you think you are done paying for the car.

That’s when you find out you still have a balance and that’s for paying off the extra GAP insurance coverage you should have had but didn’t. If a lender tacks on their insurance, it is always expensive and could leave you with a year or more of extra payments. In the case of automobile GAP insurance, it is better to be safe than sorry, and you should make sure you have the coverage you need.

Other Things to Realize about GAP

Of course GAP car insurance is important for more than just drivers who have a car loan that is more than the value of the car. For instance, if you bring in a trade-in for that new car and still owe on it, that extra amount rolls over into your new loan. In other words, the loan for your new car will pay off the old one and the new one creating a much larger loan amount than the value of the car you are driving.

If you have no trade in and also no down payment, you will probably also need to secure GAP auto insurance coverage. If you are taking out a car loan for more than 60 months, this may need to be part of your car insurance policy as well. Also, if you will be putting a great many miles on the car each year, it means you will rapidly be depreciating the value of the car. In this case, even if you started off with a narrow margin between value and loan amount, you are widening the gap. In this case, only GAP insurance can help.

There are other reasons a driver could need GAP auto insurance coverage. These are, however, the most common reasons to need it. Get quotes to protect yourself by supplying just your zip code for starters. You will be on your way to get cheap automobile GAP insurance right away.

Do You Need Toyota GAP Insurance?

You find the brand new Toyota of your dreams and now it’s time to think about financing it. Of course beyond just securing the financing you have to think about other things. Part of this is insuring the car. On a financed car, you will probably be looking at getting Toyota GAP insurance as well. The reason it is important to realize this is too many drivers get themselves into a new car without knowing how expensive the auto insurance coverage might be.

Toyota gap insurance

On a brand new car if you aren’t careful and realistic about your driving history, you could be paying auto coverage and Toyota GAP insurance coverage prices that are as much as your car payment each month. Be smart and know the basics about this coverage. Being informed will help prevent you from paying too much for car insurance.

What It is Exactly

Before you learn about how you may need Toyota GAP insurance for your new car, you should first know a little about what this coverage is.

  • GAP insurance actually stands for Guaranteed Auto Protection, although many drivers think it means it is the policy that fills in the gaps where other insurance policies fall short.
  • When you drive a car off the lot, if the amount you actually owe on it is greater than the value of the car you probably need Toyota GAP insurance. Don’t be surprised as this is quite common with financed vehicles.
  • There are often other circumstances that may cause the value versus the amount owed to differ greatly. You should be aware of what these could be so you can determine if you need GAP car insurance coverage.

Other Cases in Which You May Need GAP

GAP auto protection can help you have total protection. The main point of having Toyota GAP insurance is that if you have a financed car that is valued at less than your loan amount and you total the car out there will still be a remaining balance owed on the car. This is also true if your new financed car is stolen. While a standard auto insurance policy will cover the value of the car, you will still owe the remaining balance. GAP insurance is what covers this.

Other reasons you may need GAP car insurance coverage could include but are not limited to:

  • If your trade-in is of no value or if you still owe on your trade in and are combining two loan amounts.
  • If you have no trade in and little or no down payment.
  • If you will be driving the car a great number of miles per year, meaning the car will depreciate quickly.

The best way to make sure you are totally protected is to get the total car insurance coverage you need. If you are ready to get quotes it is as easy as supplying just your zip code to get started. From there you will have access to competitive Toyota GAP insurance rates you can choose from.

Do You Need to Buy GAP Insurance?

Even though we are always aware of everything that is going on around us while we are driving, we don’t usually think about accidents happening. Unfortunately, they happen every day, and many accidents are so serious that there is no way anyone is going to drive the vehicles involved ever again. Now, what happens when someone is in an accident with a brand new vehicle, and the vehicle ends up being a total write-off?

The loan still has to be paid, and a regular insurance policy is only going to pay the current replacement value of the vehicle. While this is a big help, it may be that you owe a lot more on the loan than what the insurance company is willing to pay. This is why many people decide to buy GAP insurance.

GAP Insurance Defined

buy gap insurance

In a nutshell, GAP insurance is coverage that will pay the difference between what you owe on a vehicle and what it is actually worth if it is totaled in an accident. Let’s break it down into numbers so you can see how it really works. If you purchase a vehicle that costs $20,000, you will make a down payment, probably around $500. Now you owe $19,500. Let’s say you make five monthly payments at $300 a month, for a total of $1,500 then you get into an accident and total the vehicle. You still owe $18,000 on the vehicle, but your insurance company is going to look at the blue book value, which will probably be considerably less.

You are still expected to pay off the balance of your loan. How are you going to pay for it? If you buy GAP insurance, you will not have to worry about coming up with enough money to pay off the balance. The one thing you do need to remember is that there are limits to how much a GAP insurance policy will pay out, and you may not be able to completely pay off the loan, depending on the limits that are set in your policy. Another thing you need to keep in mind is your deductible. You will have to pay this before you can receive any money for your claim.

You Might Want to Buy GAP Insurance if You Buy a New Car

Depending on how much of a down payment you put on a new vehicle, you could end up being upside-down if you end up in an accident and the vehicle is a total write-off. There are other reasons why you could be upside-down. If you have a high interest rate or you rolled over other expenses into your car payments, you could end up owing a pretty penny if you don’t buy GAP insurance. If you don’t want to pay for this extra coverage, you need to think about increasing the amount you are willing to pay for a down payment in order to not be upside-down in the event of an accident that destroys the vehicle.

You May Be Required to Buy GAP Insurance

If you are leasing or financing a vehicle, it may be that you have no other option but to buy GAP insurance. In some states, it is actually a requirement for lessors to suggest that customers buy this type of insurance coverage. Some contracts require that GAP insurance be included with the actual loan payments, which can come in handy, except that you may not be able to shop around to choose your own insurer. It is a good idea to buy GAP insurance whether or not it is required, because you don’t want to have any added expenses if you end up totaling the vehicle and have to buy another and still pay off the one that was totaled.

Get Quotes before You Buy GAP Insurance

The only way you are going to know whether or not you are getting the best rates for all of your insurance coverage, including GAP insurance, you need to shop around. After all, you would do this for any big-ticket purchase, so why wouldn’t you want to make sure you also get the best deals on car insurance? Shopping around means getting quotes from as many insurers as possible, which used to take a lot of time and effort.

Today, you can do it all online, and we can make the job even easier. Give us your zip code, and we will enter it into our databases to get quotes from insurance companies in your area and many of the national insurers too. Then, you can buy GAP insurance knowing that you are not paying too much for it.

 

How Much Does GAP Insurance Cost?

Are you currently financing or leasing a vehicle? If so, you really should think about having more insurance than just the bare minimum that is required by your state. In fact, it may even be that your lender will require you to carry a certain amount of insurance, and will probably recommend that you have GAP insurance. While this is an addition to the policy that many people don’t feel they can afford, in a lot of cases, they really can’t afford not to have this type of coverage.

What Is GAP Insurance?

how much does gap insurance cost

Not everyone needs to have GAP insurance, which stands for Guaranteed Auto Protection. This is coverage that is over and above your regular coverage, which will at the very least include liability but could also include comprehensive, collision and personal injury protection. If you have recently purchased a new vehicle or you are planning on doing so in the near future, you may want to consider having GAP insurance. It is used when you have an accident and your vehicle is a total write-off.

The reason why people should have this coverage is simple: your car is never going to be worth what it was the day you drove it off the lot. If you have an accident and you total the vehicle, your insurance will only cover what the vehicle is worth at the time of the accident, and you may actually owe a lot more than that on the loan.

GAP insurance will cover the difference between what you owe and what your car is worth, so you aren’t out any money out-of-pocket. There are limits to how much will be paid by this sort of insurance policy, and it may not cover the full balance of your loan in some cases. Here is the best gap insurance guide we have seen that explains how gap insurance works. It visually explains more about the coverage, costs and providers.

Is GAP Insurance a Legal Requirement?

In most states, drivers are only required to carry a certain amount of liability insurance. Anything else they have for coverage is extra, including GAP insurance. There is an exception to this rule. If you live in some states, it may be a requirement that you have it if you are buying a new vehicle. Dealers are required to offer this coverage to customers in these states. GAP insurance is available in 49 states.

Ways to Save Money on Car Insurance

Just because you need to carry a certain amount of car insurance, it doesn’t mean that you have to pay a lot of money for it. Yes, insurance can be expensive, but you can learn about many different ways to save money on your premiums and still have all of the coverage you need. When you are asking, “how much does gap insurance cost”, don’t forget to ask about the discounts that you may be eligible to receive. Some of these discounts could include:

  • Safe Driver Discounts – Most insurers will reward their customers for being safe drivers. You need to have a clean driving record for a certain period of time before you can qualify for this type of insurance discount. You will have even more of an incentive to continue to keep your driving record clean because for every year you do your rates will continue to decrease.
  • Multi-Policy Discounts – If you also need to have home owners and life insurance policies, you should inquire about combining all of your policies into one bundled package. This is an excellent way to save money on all of the insurance you need. Some insurers only deal with home, auto or life insurance, so if you want to have a bundle to save money, you will have to look for a full service insurance company.
  • Multi-Vehicle Discounts – Having more than one vehicle means insuring more than one vehicle. If you have two or more vehicles, you can ask about having them all on one insurance policy to save money. Most insurers will be more than happy to add vehicles to your policy. It will raise the rates a little bit, but it is a lot less expensive than having a separate policy for each vehicle.
  • Driver Training Discounts – You can take driver training courses that will help to lower the cost of your car insurance. When most of us think of these courses, we think about driver’s ed classes in high school. The classes are pretty much the same, but anyone can take them to help them be better drivers and get discounts on their car insurance.

 

These are just a few of the car insurance discounts that you may be eligible to receive. When you are shopping for insurance quotes, and you want to know how much does GAP insurance cost, don’t forget to ask about every way possible to save money.

Getting the Best Deals on GAP Insurance

So, how much does GAP insurance cost? It really depends on a number of factors, including the insurance company you ultimately decide to deal with. It is never a good idea to take the first insurance policy that is offered to you for a number of reasons. For one thing, if you take the first one, how will you ever know if you could have gotten a better deal elsewhere?

The only way you are ever going to know which insurance company has the best rates on the insurance products you need, including GAP insurance, is to shop around. You need to get quotes from a lot of insurance companies, otherwise you will never know if you are getting the best deal or not. Getting insurance quotes is easier than ever, and it only takes a few minutes. If you let us help, you don’t have to do much of anything yourself, except sit back and wait for the quotes to come in. Just give us your zip code, and we will get you all kinds of quotes from insurers in your area, as well as national insurers. You will learn how much does GAP insurance cost, and you can decide which insurer is going to offer the best deals on all of the coverage you need.

Should You Choose Stop GAP Insurance?

Insurance for an auto is a must in every state, regardless of what the law states. In all but a few states there is a legal requirement to carry auto insurance, but that minimal amount is usually not enough in a real world sense. Even if you have so called “full coverage” insurance on your car, there are instances where the amount you are given in an insurance settlement is far less than you actually need. You may need GAP insurance coverage if any of the following is true:

stop gap insurance

  • You just bought your car and have a loan on it.
  • You are leasing your vehicle.
  • You refinance your vehicle.
  • You use your car as collateral on a loan.

Remember, there is a difference between the amount that the insurance company will pay you for your vehicle, what your car is worth (to you) and what you actually owe on the vehicle.

Where Can You Get GAP Insurance?

There are a few states that do not offer GAP insurance at all. Those states are:

  • Alabama
  • Connecticut
  • Louisiana
  • Maine
  • New Hampshire
  • New Mexico
  • New York
  • Virginia
  • Washington

The District of Columbia also does not offer GAP insurance at all.

In all other states, GAP insurance might be purchased from a number of different providers, including:

  • Your regular insurance agent (online or in person)
  • Through the bank or financing provider (This is likely to be a more expensive option.)
  • Through a specialized insurance seller

When you finance your vehicle, the provider may offer this additional protection to you, but keep in mind that the coverage that they offer is liable to be skewed toward their own needs and might cost more than what you would pay for the same coverage through your agent. Compare prices before you make a final decision.

An Alternative to GAP Insurance?

For the states that do not offer GAP insurance as well as for the majority of the others, there is an alternative that offers much of the same kind of protection. Called a “total loss policy,” this coverage pays not the actual cash value of the car, but the amount that you owe or enough to pay for a new car.

  • Some insurance companies are now offering policies that guarantee a replacement car that is a set amount more valuable than the one that was lost or a car that is one model year younger. For instance, if you insure a 1986 car that is valued at $5,000 and it is a total loss, you will either get a check for that amount or enough to buy a comparable car from the 1987 model year.
  • California does not allow for the total loss policy, however the state does allow for the GAP insurance coverage.

What Does Actual Cash Value Mean in the Real World?

Insurance companies use “actual cash value” to determine how much they pay out in the case of a total loss. That value is not what you owe on a loan nor is it the same amount that you would have to pay to buy a new car. ACV is the reason that most people will need a GAP insurance policy in the first place because they are often going to fall short of what their loan balance is in the event of a total loss. But, imagine that you have a car that is involved in a terrible crash. You want to replace that car with the latest model year of the same car. How would that work out for you? Here is an example using the Ford Taurus as an example.

  • The Kelly Blue Book Value for the 2006 Ford Taurus SE Sedan four door, assuming excellent value, is $8000 (rounded to the nearest dollar amount).
  • The 2013 Ford Taurus model is priced at $25,334 (dealer invoice pricing), which means that at the typical car lot, the advertised price will be roughly $26,000 to $27,000.
  • Add to the above amount the cost of financing, interest, taxes and tags as well as other fees. If you choose any options packages, the price might be substantially higher.
  • In the event of a loss, the amount that you get from the original Taurus might be around the $8,000 that the Kelly Blue Book states it is worth.  That means that you will still be facing several thousands of dollars to buy the car that you want- or finance it through a bank or third party financing company.
  • Figuring either a down payment or a trade in, the monthly cost of your new car would be nearly $400.

What Are the Least Expensive Cars to Insure?

Here are the ten least expensive cars to insure:

  • The Chrysler Town and Country (minivan)
  • Chevrolet Cobalt
  • Dodge Caravan
  • Chevy Impala
  • Ford Taurus
  • Ford Econoline
  • Jeep Grand Cherokee
  • Chevy Malibu
  • GMC Sierra Pickup
  • Toyota Corolla

And the ten most expensive to insure:

  • Chevrolet Silverado C/K Pickup
  • Dodge Ram Pickup
  • Ford F Series Pickups
  • Ford Explorer
  • Nissan Altima
  • Honda Civic
  • Toyota Camry
  • Chevrolet Trailblazer
  • Ford Focus
  • Honda Accord

The more that you owe on your vehicle, the more that you need GAP insurance coverage.

How an Insurance Company Looks at Your Claim

Another way to decide if you need to have GAP insurance coverage is to consider how an insurance company looks at a possible claim on your car. As soon as you drive your car off the lot, it starts losing value. If you buy a used car, it already starts at a lower value point. When you file a claim, the insurance company looks at several options:

  • They can choose to repair the car if the cost of repairs are substantially less than the car is worth or insured for.
  • They can choose to pay the market value of the car if the cost of repairs is higher than it is worth.
  • They can offer a lesser settlement amount somewhere between the two.

GAP Coverage Insurance for Young Drivers

Why Young Drivers May Need GAP Coverage Insurance More Than Other Drivers

The typical new driver is between 16 and 18 years of age, an age not known for making the most sound decisions in the world. In the insurance world, their lack of skills, experience and decision making capabilities means that they are more expensive to insure. Simply put, car insurance for young drivers is more costly because they typically cost more to insure. Here are some statistics to put the need for GAP insurance coverage into perspective:

gap coverage insurance for young drivers

  • Motor vehicle accidents are the leading cause of death for young drivers ages 15-20.
  • Drivers who are 16 years old have the highest rate of crashes of any age group.
  • In 2008, there were 2739 young drivers ages 15-20 who died.
  • More than ten percent of the drivers who were involved in fatalities were 15-20 year olds, and 14% of that same age group made up all reported crashes.
  • More than 60 % of all teen deaths happen in a car driven by another teenager. Among deaths that occur in a car for passengers of all ages, 19% happen with a teen driver.
  • Young drivers cost the insurance industry roughly $34 billion every year in the cost of medical treatment, property damage and other expenses.
  • The rate of cell phone use while driving is highest for drivers who are aged 16-20.
  • In the event of a driving fatality involving a young male driver, 37% were speeding.
  • 55% of teens involved in fatal car accidents were not buckled up.
  • 31% of teen drivers involved in a fatal crash were drinking at the time, and 25% were legally impaired.
  • The death rate for 16-17 year olds goes up for every additional passenger that they have in the car.

How GAP Insurance Protects the Young Driver

For the average young driver, the cost of the car is likely to exceed its value by a considerable amount. Whether the driver is paying for his or her own insurance or using a parent’s, it is important that the amount that is covered is enough to protect losses and to help replace the car that the driver has. Here are the facts related to car insurance and car values for young drivers:

  • Buying insurance for your young driver is expensive regardless of the type of car, but the right car can make the cost lower as well as making the driver safer.
  • Reducing the cost of insurance is vital to making the insurance more affordable. There are a number of discount that are available to lower the cost of insurance.
  • GAP insurance coverage is important because it can allow for the lower cost insurance to be used but still provide enough protection for the young driver.

Car Models Considered to Be Safe (and Affordable) for the Young Driver

Before you can make a choice about auto insurance and look for GAP insurance policies, you must first determine the kind of car that the young driver will be using. There are several models that are not recommended including sports cars and large SUVs, which are typically too hard for the inexperienced driver to handle. However, these cars are typically given the green light by experts:

  • Acura TSX
  • Chevrolet Malibu
  • Ford Focus Sedan
  • Ford Fusion
  • Honda Accord
  • Hyundai Elantra SE
  • Hyundai Elantra Touring
  • Hyundai Sonata
  • Hyundai Tucson
  • Kia Forte

In addition to avoiding sports cars and SUVs, the young driver should also avoid very small cars, which are typically too light and small to give them a lot of protection in the event of an accident.

An Example of How GAP Insurance Works for the Young Driver

The young driver gets a car priced (but not valued) at $5,000. After paying $250 down, the rest is financed by the car lot’s third party financing company for a fee, interest and taxes. After all is said and done, the financing amount will leave the young driver with a loan that has a balance of more than the original $5,000. For the sake of clarity, the rounded amount is $6,000. Insurance on this car will pay what the book value of the car is. Assuming the following:

  • Cars depreciate as soon as they are driven off the lot.
  • This car is not a new vehicle, meaning it was already greatly under value at the time of the original purchase.
  • Any accident involving a teen driver is likely to cause a total loss of at least one vehicle. That does not include the cost of medical treatments or other expenses involved.

If the insurance policy covers the liability to the amount stated on the policy plus cover the teen’s vehicle, there will be a remaining amount on the loan’s balance. That is what GAP coverage is meant to pay.

What You Should Know About New Jersey GAP Insurance

In New Jersey, as in many other states, auto insurance is a mandatory requirement. But, while the law mandates that you have to have insurance to drive in the state, it does not specify what type of coverage that you carry. According to the Auto Insurance Cost Reduction Act enacted in the Garden State, the basic policy must be made available to all drivers regardless of their driving or credit history. But, for many drivers, that basic policy may not provide enough coverage or protection for their situation, so they choose to add a GAP insurance policy to provide more security.

What Is a GAP Insurance Policy?

New Jersey auto gap insurance

Not all insurance policies are created equally. In New Jersey, there are two main options, including the basic and the standard insurance policy. Both are written to provide certain types of coverage at stated minimum and maximum amounts. The amount that the insurance company will pay is determined by those limits. However, in the event of an accident, the costs can quickly surpass these limits even in the case of the higher coverage policy. If there is a lien or loan on the car, the amount that the insurance will pay may not be enough to cover the cost of the vehicle if it is completely destroyed.

Most lien holders will demand that the car be covered by more than just basic insurance to protect its investment, but even with the higher cost insurance, it may not be enough. That is when the GAP insurance policy comes in handy. As its name implies, GAP insurance covers the remaining amount that the initial insurance policy did not.

If you owe money on your vehicle, you will typically owe far more than what the insurance company will pay. Most insurance companies pay out only on what the car is currently worth, not what it cost. Even if you have an accident five days after buying the car, you will not get the amount that you paid for the car less than a week ago. And, if you financed the car, there will be additional expenses beyond just what you paid for it, which means that the balance you have to pay for the car you just wrecked will be fairly substantial.

Remember, financing does not include just the cost of the car itself but also interest, taxes and fees that can vary from lender to lender. If you wreck your car, you must still pay off the balance.

How GAP Insurance Works

In New Jersey, the standard policy has coverage limits for property damage. In the event of an accident, that amount will go toward paying off all of the costs associated with the accident, including the other car, other structures that were damaged and your own vehicle. If there is an amount remaining, that will become your personal responsibility to pay out. If you have a GAP insurance policy in place, it will pick up the remainder to prevent it from coming out of your pocket.

 

What Does GAP Insurance Cover?

It is not something that we want to think about, but sometimes things happen, such as car accidents, vandalism and theft, and we end up having to pay a lot of money to replace our vehicles. Having full coverage auto insurance is a good way to make sure that most of your expenses are taken care of, which is especially important if you are financing a vehicle and are still making payments. But, what if your coverage isn’t quite enough, and you don’t have enough money to replace your vehicle? This is where GAP insurance can come in handy. You may be wondering, “What does GAP insurance cover”? Basically, GAP insurance is only used when your insurance does not cover enough to pay for all of the damages while you are still making payments on your vehicle.

How Does GAP Insurance Work?

what does gap insurance cover

Many people find GAP insurance confusing, but actually it is pretty simple to understand. Let’s say that you have decided to finance a vehicle. The vehicle costs $10,000, and you make a $500 down payment. You now owe $9,500. Now, what would happen if you only made a couple of payments and then totalled the vehicle in an accident or it was stolen?

The second you drive the car away from the lot, it begins to decrease in value. Almost immediately, it is not worth what you paid for it, and your insurance will only cover the current value of the vehicle. Would you be able to pay back the loan in its entirety if your insurance did not cover the entire cost to replace the vehicle? Probably not, but if you have GAP insurance, you won’t have to worry about it.

GAP Insurance and Buying a Vehicle

If you are buying a car outright or making payments on it, you can be sure that your vehicle is not going to be worth the price you paid if you are in an accident later on down the road. What does GAP insurance cover? It covers the additional cost to replace your vehicle over and above that which the insurance company is willing to cover from your full coverage policy. If you are buying a new vehicle, consider having GAP insurance, just in case.

GAP Insurance and Leasing a Vehicle

Even though a lease is not the same thing as purchasing a vehicle, you are still responsible for the cost of replacing the vehicle if it is stolen or totalled in an accident. The amount that you pay for the lease is probably considerably lower than what it is actually worth, and having GAP insurance will help to cover the additional costs that you probably can’t afford to pay out-of-pocket.

Getting the Best Prices

Now, you don’t have to ask, “what does GAP insurance cover”. You know what it is and why you need it, now all you have to do is go out and get it. The thing is to get it from the insurer that is going to offer the best rates. This may not necessarily be the insurer you currently deal with. Give us your zip code, and we’ll search our databases to get quotes from insurers in your area and national insurers so you can get the best deal on GAP insurance.

Choosing GAP Insurance for More Complete Insurance Protection

Insurance is meant to fulfill many needs: it must satisfy the laws of the state of residence. It must protect the property owner’s possessions and their assets in the event of a loss or worse, in the case of a possible lawsuit. And finally, it must protect any lien holder’s interests in that property until it has been fully paid off. In some cases, GAP insurance might be a vital need to ensure that all of those needs have been met.

When Might You Need GAP Insurance?

If you have a loan on your car, especially one with a larger balance, you might need a GAP insurance policy. Here are the questions to ask yourself about GAP insurance:

  • Do you know the actual value of your vehicle at this moment? That is different from how much you need the car or the price you would take if you were going to sell it. Cash value is determined via certain resources and only takes actual physical condition into account.
  • How much is the payoff for your current loan balance?  Those two numbers are often very different from one another.
  • If you have a total loss, how much more will you have to continue paying on a loan for a vehicle that you are no longer able to drive?

Limits for GAP Insurance

Like other types of insurance, GAP insurance policies have some limits. Understanding these limits is vitally important:

  • GAP insurance coverage is only available in certain areas.
  • It only covers loans from structured, approved sources like a bank or auto financing company. If you have a loan from a family member, there is no GAP insurance policy that you can use to provide the same type of protection.
  • You still have to carry your regular insurance as required by your state.
  • There are a large number of things that the GAP insurance policy will not cover.
  • It will not cover commercial vehicles

What GAP Insurance Covers

First, this is what a GAP insurance policy will actually cover in the event of a covered loss:

  • The GAP policy will cover the difference between your car’s current cash value and the outstanding balance on the loan.
  • It may also be used to pay your regular insurance’s policy deductible.

What GAP Insurance Will Not Cover: The list of things that the policy will not cover is actually longer. These include:

  • Repairs and maintenance to your car if it breaks down.
  • A rental car while your car is in the shop for any reason.
  • The value of the car or the balance of your loan if your car is repossessed.
  • Any carry over balances on the loan that you have.
  • Losses as the result of illegal behaviors on the part of the driver such as racing, etc.
  • Personal belongings that in the vehicle at the time of the loss or event.
  • Specialized equipment that has been added to the vehicle. This can include stereo systems, alarms and other items.
  • A down payment for a new car

Are There Other Options for Your Needs Beyond the GAP Insurance?

If you cannot get GAP insurance in your area or do not qualify for it by your current situation, there are other options that you can use. These include:

  • A personal umbrella policy that can be written to extend to your vehicle.
  • An increased amount of insurance on your car. There may be limits to how much insurance you can put on your vehicle, determined by its value.

More Facts to Know About GAP Insurance

In addition to the limits for coverage, there are also a number of other things that you should consider about GAP insurance. These include:

  • GAP insurance is available in nearly every state with the exception of: Connecticut, Louisiana, Nevada, Virginia and Washington.
  • You are restricted to the time when you can buy GAP insurance to the first year after purchase unless you refinance the loan after that period. You can then buy GAP insurance in that year.
  • GAP insurance is limited to a specific loan-it cannot be transferred to a new loan.

Before buying GAP insurance policies, it is important to do your research and to shop around for the best quotes. There are a number of companies that claim they are selling these types of policies but are not. GAP insurance is typically not that expensive but that is simply because of the limits of what it covers and the number of restrictions that it involves.