Gap Auto Insurance Coverage – From A-Z
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UPDATED: Feb 18, 2022
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Thought you knew all there was to know about insurance? Well you probably haven’t heard of gap auto insurance yet. Having a car is a big responsibility. One of the biggest issues to sort out when it comes to automobile ownership is the insurance. Not only is it one of the most important things you will deal with it can also end up being one of the most expensive. Of course, without it you are looking at even greater expenses, including possible legal infractions and fines for driving without it.
If you are looking to buy a new car, a used car with financing or a vehicle to lease, one term you had better get familiar with is gap insurance. The problem is many people assume they have it or just aren’t aware of what it is so they never bother to check or get it in place. Ask any gap insurance providers and they will tell you just how crucial this type of coverage really is.
One thing is for sure, if you don’t have gap insurance quotes and then get a policy to cover your new or leased car, you may find out the hard way what exactly it is. As with any insurance you never know when you are going to need it. It can be easy to assume you have it but unless you know for sure you could be in real trouble when you find out your current policy does not have gap coverage.
- What is gap insurance? Gap actually stands for Guaranteed Auto Protection. Coincidentally it could also be used to describe what the coverage does. That “gap” between what you still owe on that car loan and what the car is worth is what this coverage is all about. When you owe more on your car than the car is actually worth, you need gap insurance.
- Gap insurance is especially important in the early stages of the car loan when it is almost certain your car is valued at less than what you owe on it.
- You should be getting those gap insurance quotes if you bought a brand new car or leased a car. Also if you brought in an “upside down” trade in to get another car, you most certainly have to have this type of coverage in place.
- If the trade in you brought in for your new or used “new to you” car was of little value, then your payments were probably adjusted to reflect this and more than likely you are paying more than the value of the car, especially in the infancy stages of the loan.
- If you bought a car on credit with little to no down payment in place, you can be almost certain that you should be contacting gap insurance providers for rates. With little to no money down, the loan amount is higher and therefore even on used cars, you are usually paying a bit more than the car is worth, at least at first.
So now that you have an idea of when gap insurance coverage is needed now, you need to know the “why” about needing gap auto insurance coverage.
What Gap Insurance Does for You
Aside from the peace of mind you get from knowing you have all the insurance coverage you need for your car, there are other reasons you must have gap auto insurance for cars that are still in the “red” or worth less than the amount taken out as a loan for it. Though there are really only two main causes where you would need it, without it the consequences are dire.
- The car is “totaled out” meaning the damage is extensive enough to deem the vehicle not salvageable
- If the car is stolen and never located or retrieved
The thing is most people assume their brand new car is covered for both of these things. Especially in the early stages of the loan if either of these two incidents happen and you do not have gap auto insurance, you will realize the importance when you find out you have to keep making those loan payments and there is no replacement car showing up in your driveway.
When you take out that car loan you are responsible for the payments until the entire balance of the loan is satisfied regardless of circumstances. If you do not have gap insurance coverage and your car is destroyed or stolen and never recovered, you still make those monthly payments. You could be paying a loan for years on a vehicle you do not even have to drive.
Though it isn’t rocket science, some jargon may get thrown around that leaves you scratching your head when it comes to talking with different gap insurance providers. For instance:
- “Upside Down” – When you leave the lot with that new or used car and owe more than the current value of the vehicle, you are “upside down” on your loan. This is why gap auto insurance quotes are crucial to get before signing the dotted line for that new car and loan payment. This is magnified if you bring in a trade vehicle you are still upside down on.
- “Totaled Out” – If you have an accident and your car is “totaled out” it means the damage was extensive enough that it was more cost efficient for the insurance company to replace the car then invest in repairs. In some cases, the car is beyond possible repair or repair would compromise the safety or reliability of the vehicle. With gap insurance you can get a new replacement car, but without it you keep the payments minus the car.
Don’t make a mistake and end up without the gap insurance coverage you need. Gain access to quotes from plenty of competitive gap insurance providers just by supplying your zip code. There’s no need to offer up any more personal information to start with, and in a matter of no time at all you will have the gap insurance quotes you need to make an informed decision.