- The difference between the value of a totaled car and the amount that the owner still owes on their auto loan or lease is covered by gap insurance.
- If a driver financed their vehicle with a minimal down payment, leased their vehicle, or had a vehicle that depreciated quickly, they might think about purchasing gap insurance.
- Gap insurance is available from your auto insurance provider, the lender, or the dealership. State Farm, Progressive, and Allstate are the three biggest auto insurance providers in the US from which you can purchase gap coverage.
- When purchased from a dealership, gap insurance costs between $400 and $700, and when added to a car insurance policy, it costs between $20 and $40 annually.
In This Article...
What is the typical gap insurance coverage?
Buying standalone gap insurance: Some auto insurance providers don’t include gap insurance as part of your entire policy, but they do provide it as a stand-alone, distinct coverage choice. The typical price of gap insurance when you select this option is a one-time fee of $200 to $300.
Toyota offers a gap insurance refund.
Up to the longest time permitted, GAP must have the same duration as the finance or leasing agreement.
Only transferable if the original finance or lease agreement is changed. The original loan or leasing agreement will be transferred to the new owner.
Within 30 days of purchase, you can cancel your GAP and get a full refund. Unless a claim has been made, or unless state law specifies otherwise. Please consult your agreement from the time of purchase or contact your dealer about cancellation policies that extend beyond 30 days or state requirements. After cancellation, your GAP cannot be reinstated.
Note: Depending on when the Agreement was purchased, the benefits described below may change or somewhat differ.
How is the price of gap insurance determined?
Gap insurance is not available to all drivers, and not all eligible drivers should purchase it.
Only if you financed the purchase of your car or if you leased it are you eligible for gap insurance. You shouldn’t think about buying gap coverage if you own your car outright.
Even if you financed your car, you only need gap insurance if your debt exceeds the value of the vehicle. Finding the monetary value of your car and deducting it from your debt is the easiest approach to figure out if you need gap insurance.
You won’t be able to determine the precise figure your insurance provider uses to determine the actual cash value of your car, but you can get an idea of it by visiting a nearby appraiser or checking Kelley Blue Book.
For instance, we discovered that a 2021 Honda Civic Touring’s Kelley Blue Book value is about $25,000. You are underwater on that automobile if you still owing $30,000, so gap insurance might be useful.
The best approach to determine if you need it is to calculate the difference between the value of your car and what you owe on it. Additionally, you might be more likely to want gap insurance if any of the following circumstances apply to you:
- Gap insurance may be necessary as a condition of your loan or lease in order to protect you in the case of a total loss. However, just because it’s necessary doesn’t mean your loan or lease will cover it, and you might be able to get less expensive insurance elsewhere.
- You chose a long lease or put little money down: Your automobile will probably depreciate more quickly than you are paying it off if you have a small down payment or a long lease, especially in the first few years of ownership.
- You drive a high-end or luxury vehicle: If you purchased a Cadillac or Lexus, you run a higher risk of having your loan balance exceed the value of the car because luxury autos degrade more quickly than other cars do.
- You make lengthy drives in your automobile: While every car loses value the moment you drive it off the lot, making long drives in a new car causes the value to drop much more quickly. The car loses value as you log more miles on it.
Most likely, you won’t always require gap insurance. As long as the terms of your lease permit it, you should stop using gap coverage once you have paid the loan down to the point where it is worth more than you owe. A total loss of your car would not incur any further costs if you have gap insurance.
Is gap insurance worth it?
If the cost isn’t too high and you might end up with a sizable expense to pay off a car you no longer own, gap insurance is worthwhile. Calculate your current auto loan’s “upside-down” status by using the numbers. In the event of an accident, you can receive little to no payout if your loan payment is close to the real cash value of your car.
However, gap insurance is well worth the typically cheap cost if your car is worth significantly less than the amount still due on it.
When it’s not necessary, many policyholders don’t want to buy supplemental insurance. Keep in mind that when your car depreciates and you continue to make loan payments on a regular basis, your “gap” will decrease.
How to tell if you have gap insurance
Check your current auto insurance policy and the terms of your lease or loan to see if you currently have gap insurance. Before adding coverage, be sure you aren’t already paying for the gap because it is occasionally offered as an add-on by the dealer when financing a car.
Even if you have coverage, it’s always worthwhile to shop around to see if you can find gap insurance for less since auto dealers frequently charge extra for it.
Is purchasing gap insurance worthwhile?
Gap insurance might undoubtedly be worthwhile if there is ever a period when you owe more on your car than it is currently worth. Get gap insurance at least for the first few years of ownership if you put less than 20% down on a vehicle. You ought to owe less money on the car by that time than it is worth.
How much will gap insurance cover in total?
- In addition to your deductible, gap insurance covers the difference between what is owing and what the physical damage insurance provider pays: $2,000
What is loan or lease coverage and how it is different from gap coverage?
Although the terms loan/lease coverage and gap insurance are sometimes used interchangeably, they typically don’t refer to the same coverage. The actual cash value (ACV) paid out by your auto insurance company will be less the amount you still owe on a vehicle, and the gap insurance will cover the difference.
Usually, lease/loan coverage has a cap on how much it will pay out, such as 25% over the estimated ACV of your car. Your deductible is deducted from both.
Let’s say you total your $18,500 automobile with a $500 collision deductible, but you still owe $25,000 on it. There is a $6,500 discrepancy between what you owe and what the item is worth. There is a $6,000 discrepancy after your $500 deductible has been paid.
This total sum would be paid out if you had gap insurance. It would only pay $4,625 with lease/loan coverage that only pays up to 25% over the value of the vehicle (18,500 x 25% = $4,625). Therefore, if you chose the lease/loan option, you would still owing $1,375.
Run the figures to ensure that lease/loan coverage will work for you. For instance, if the car was worth $20,000 in the previous case, 25% of that amount, or $5,000, would be the difference ($25,000 payable – $20,000 paid by insurer plus your deductible = $5,000), and it would have covered the entire amount.
Suppose you purchase a car for $40,000 and have loan/lease coverage that pays 25% more than the automobile’s real cash worth. Eventually, the car loses value and is worth $25,000. After it is deemed a total loss, the maximum you might be compensated is $31,250 less the deductible.
What will the amount of my gap insurance refund be?
You must first check the policy expiration date, multiply the amount you paid for the GAP insurance by the number of months your policy is valid, and then calculate your due GAP refund. By dividing the monthly cost by the number of months you won’t be utilizing the premiums, you may determine your owed refund.
For instance, if you paid $900 for a 36-month period of coverage, your monthly payment would be $25. After 22 months, you have the option of requesting a refund for the remaining 14 months of coverage if you decide you no longer require GAP insurance. Your reimbursement will be $350 in that scenario.
Keep in mind that this only applies if you pay the entire GAP insurance premium up advance.
Full GAP Insurance Refund
Check your policy’s terms and conditions to see if you qualify for a full GAP insurance refund. Various GAP insurance companies may have different terms and costs.
If you cancel your GAP insurance within 30 days of obtaining the policy, you should often receive a full refund, however cancellation costs might be charged.
The Toyota Debt Cancellation Agreement: What Is It?
An agreement that the holder of a retail installment contract will cancel a specific amount of the contract’s debt if the car is stolen or totaled is known as a debt cancellation agreement (DCA). Some DCAs demand that the retail buyer keep the car insured. Our office must receive a DCA for review before requiring a retail buyer to keep insurance. Following submission to the agency, the OCCC has 45 days to approve or deny this kind of DCA form. Each DCA requires a $250 nonrefundable filing fee as of May 5, 2016.
*NOTE: The OCCC will start receiving DCA filings for retail installment transactions on Chapter 345 covered cars on July 1, 2017. (motorcycles, recreational vehicles, recreational vehicles, all-terrain vehicles, snowmobiles, campers, boats, personal watercrafts, and personal watercraft trailers). Before September 1, 2017, retail vendors cannot provide DCAs for these Chapter 345-covered cars. A retail seller must make sure that a DCA has OCCC approval before selling it. The submission procedure for the Chapter 345 DCAs will be as listed below.
When is gap cancelable?
Gap insurance is cancellable at any time, and some motorists might be eligible for a return if they never use the coverage.
If you’ve leased or financed a car, the dealership or your insurance provider likely provided you gap insurance. If your automobile is stolen or totaled, gap insurance will pay the difference between what you owe and what the car is actually worth.
There may come a time, though, when you determine that gap insurance is no longer worthwhile. Fortunately, gap insurance is optional; you can decide to discontinue it at any time.
- If your financed or leased car is totaled or stolen, gap insurance pays out your loan.
- Unlike auto insurance, gap insurance is not mandated by law, and you are free to discontinue it at any time.
- Once your loan debt is less than the actual cash value of your car, it is frequently wise to terminate your gap insurance.
- When a driver purchases gap insurance in advance, they may be eligible for a return.
- Gap insurance products are available from motor insurance companies, finance companies, and dealerships.
Why did Toyota Motor Credit Corporation send me a refund check?
There are a number of terms shown in the status column on the website’s payments page. What are they saying?
The following definitions are useful:
Your money will be settled on the posting date as planned. During the “Scheduled” stage of a payment, you may do the following:
- Edit: You can modify your payment information by choosing “Edit and submitting updated payment information if your planned payment has not yet reached the “Pending state.
- Select “Cancel” to stop one or all future scheduled payments if your payment hasn’t yet reached the “Pending stage.
If your account has several account holders, you can only change or cancel a scheduled payment that you have made.
Cancelled: Either you or we cancelled your payment. If your account is closed or your finance term has expired, we cancel a payment.
Your payment transaction is currently pending and being prepared for bank processing. It won’t be possible for you to alter the payment information. Your bank account will be charged on the post date or a later date.
Your payment transaction failed, it was reported. When bank account information cannot be verified, this status is displayed. The bank account might have been closed, the account may have a debit block, or the account number may be incorrect.
When You Can Get a GAP Insurance Refund
Start with the positive news. You can normally cancel your GAP insurance and receive a return in one of three circumstances:
1. Your loan is being repaid.
It can be a terrific feeling to pay off your car loan and get rid of that tiresome monthly cost (including those outrageous interest payments). Better still? You are qualified for a portion of the GAP coverage that you haven’t yet used if you pay off your auto loan early. Here’s the justification for your meager return. While your loan was still open, you previously used a portion of your GAP insurance. Therefore, you will only receive a prorated refund for the portion that you haven’t yet utilized.
2. You’re transferring to a new insurance provider.
You can choose a different supplier of insurance if you’re not happy with your current one. You are qualified for a refund for the cancelled coverage you didn’t use after canceling your policy with your original provider (be sure to have new auto insurance in place before canceling the prior insurance). Normally, you can receive a full refund if you cancel your insurance within 30 days of the policy’s start date (including GAP insurance costs). Your refund will be prorated if you cancel your insurance after 30 days have passed. For information regarding your coverage, contact your insurance company.
3. You’re trading in or selling your vehicle.
You can receive a reimbursement for the portion of the coverage you didn’t utilize if you sell or trade an automobile for which you purchased GAP insurance. Don’t terminate your insurance until the vehicle has been lawfully sold or exchanged.
Here is one instance. Let’s imagine you first made the decision to purchase a $30,000 car and borrowed $25,000 to do so. In order to safeguard your financial security in the event that the car is totaled or stolen before you have had a chance to pay off your $25,000 loan, you also purchased GAP insurance for a full year. (Smart!)
You want to end your GAP insurance coverage after three months of coverage. Any of the aforementioned factors (debt payback, changing GAP insurance providers, or selling or swapping your car) could be the cause. For the nine months of the year you didn’t utilize your GAP insurance, you’ll get a refund. Nice!
An immediate reminder on reimbursements from loan payoffs: You’ll get a portion of your GAP coverage that you haven’t utilized back once you present your loan payoff notice to your GAP insurance provider. Wait until the car is either legally no longer yours or your initial loan is formally paid off, depending on why you want to terminate your GAP insurance.
When You Cannot Get a GAP Insurance Refund
fresh good news You can only receive a GAP insurance reimbursement in one circumstance. If you count not having GAP insurance at all, it makes two.
But let’s focus on the important one. You won’t be qualified for a refund for the remaining months of coverage if your insured car is deemed a total loss and your GAP policy pays out the difference between the car’s value and your loan balance. This is because the insurance company believes that they are no longer liable for paying claims under the policy because they have already met (or surpassed) their obligations under the GAP coverage you purchased.