In the event that your car is deemed a total loss, your current auto insurance might not be sufficient. The primary auto insurance settlement is frequently based on the market value of the car, which can be lower than the remaining sum under your finance or lease agreement.
Guaranteed Auto Protection (GAP) waives or pays the difference between the amount still outstanding on your loan or leasing agreement and your auto insurance payout (less specified fees and taxes).
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Total Loss Protection
GAP may lower or even eliminate your remaining payment if your car is deemed a total loss due to theft or unintentional damage but you still owe more on your loan or lease agreement. 2
How can I get Toyota to reimburse my gap insurance?
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.
What is covered by a gap policy?
If your automobile is totaled or stolen and you owe more than the car’s depreciated worth, gap insurance, an optional form of auto insurance, can help.
Is it beneficial to revoke your gap insurance?
It may be wise to cancel your gap insurance policy in some circumstances.
When it no longer makes financial sense to continue paying for it, Langhoff advises, is a good moment to cancel gap insurance. This typically occurs when the outstanding loan balance is less than the car’s book value, which is the original purchase price less the car’s decreased value over time.
In the end, a gap coverage is only worthwhile when the amount owed exceeds the value of the vehicle. Therefore, even if your car is totaled or stolen, if the value of your automobile is more than the balance of your loan, you are essentially paying for coverage that you will never use.
Langhoff further notes that some drivers opt to revoke their gap insurance policies if they believe they overpaid for coverage, plan to sell their automobile, or need to reduce their insurance costs.
What advantages does gap insurance offer?
The difference between your auto loan and the vehicle’s depreciated value is covered by gap insurance. In other words, gap insurance assists you in paying off your auto loan or lease if you are unable to continue driving your vehicle as a result of theft or totaling it.
A gap claim cannot be made if you are simply unable to make your loan or lease payments due to the fact that gap insurance only pays when your car is damaged or stolen. Additionally, the majority of gap insurance policies won’t cover your expenses. If applicable, the collision or comprehensive deductible.
Do you receive your GAP insurance refund?
The cutoff date for GAP insurance refunds may vary depending on the insurance company, but typically you can be eligible for a refund at any time before the policy period ends. You might be eligible to ask for a refund, for instance, if you buy a GAP coverage that is supposed to last 36 months but you decide to cancel after 24 months.
How much will I get back for the gap?
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.
If I have complete coverage, do I still require gap insurance?
Guaranteed Asset Protection is what “Gap” stands for. In the event of a total loss claim, this type of insurance coverage pays the difference between your automobile’s cash worth and the amount you currently owe in car payments (such as if your vehicle is totaled or stolen).
You can get gap insurance in addition to a full coverage policy. Liability insurance, collision insurance, and comprehensive insurance are typically included in full coverage. If your car is financed, gap insurance can be something you desire, especially if you only put a little down payment on it.
Your insurance company will only reimburse you up to the actual cash worth of your car if your car is totaled. ACV is a projection of the vehicle’s open market retail value. If you have a loan on your car, you can owe more in payments than the value of the vehicle itself. Gap insurance coverage will pay the shortfall if this occurs.
It’s possible that you’ll never be able to purchase gap insurance. Usually, gap insurance is not available for older vehicles. In general, any car older than three model years is not eligible for gap insurance coverage. Specific conditions differ per insurer.
Gap insurance is provided by a number of national motor insurers, including:
- Nationwide
- City Farm
- Farmers
- Allstate
- Progressive
- AAA
- USAA
At the moment, Geico does not provide gap insurance. You’ll receive gap coverage alternatives from the dealer when you buy your car because your lender might still insist on it.
Theft is not covered by gap insurance. It only pays if you still owe money on the loan and your car is declared a total loss. However, theft is covered by comprehensive insurance, which is a requirement of lenders for vehicles with auto loans.
Gap insurance is only required when the balance of your loan exceeds the value of the car. This usually happens in the first few years of the loan. At this point, you can ask your auto insurance provider to stop providing coverage. However, if you paid for gap insurance through a dealer, you’ll be responsible for it until the loan is paid off, barring a refinance.
How much gap insurance do you pay for?
A GAP insurance policy, which typically lasts three years, is made to address this issue by covering the discrepancy between the sum you receive from your auto insurer and the cost of replacing your vehicle.
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% more than 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. Only $4,625 would be paid under lease/loan coverage, which covers only up to 25% of the vehicle’s worth ($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 vehicle was worth $20,000 in the aforementioned scenario, 25% of that amount would be $5,000, which is equal to the difference ($25,000 due – $20,000 paid by insurance and your deductible = $5,000), meaning the entire amount would have been covered.
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.
A blown engine is it covered by gap insurance?
Even if you have full coverage, engine failure is typically not covered by auto insurance. The only exception is if the broken engine or mechanical issue can be directly connected to a claim that is covered.
If you are in an accident or your automobile is damaged because of a covered claim, your auto insurance policy may offer four standard insurance coverages that will pay for repairs. None of these insurance policies cover mechanical issues or an engine blowing up due to natural wear and tear.
The coverages and what they cover are listed below:
- Collision: Covers the cost of replacing or repairing your car following a collision.
- Comprehensive: Covers losses that do not come under collision insurance, including as theft, vandalism, cracked windows or windshields, natural disasters, and animal collisions.
- In the event that you are involved in a collision with a negligent party who does not have sufficient liability insurance or no insurance, uninsured motorist coverage will pay for your vehicle’s damages.
- When you are at fault, liability insurance pays for the injuries or property damage sustained by the other party.
Will gap insurance cover engine failure?
Engine breakdown is not covered by gap insurance, no. An auto insurance policy may contain gap insurance as an optional coverage. The difference between the book value of your totaled car and the balance you still owe on it will be covered if you have gap insurance. If automobile owners who finance or lease their vehicles are concerned about going “upside down” on their loan or lease if the car is totaled in an accident, they might think buying gap insurance.
This highly specialized coverage only becomes active in the event that your car is totaled in a covered claim. Engine failure, typical wear and tear, or other mechanical issues with your car are not covered by it.
How can I cancel my vehicle loan’s gap insurance?
It may take some effort to navigate your dealership’s return policy for gap insurance. You’ll need to get in touch with the dealership’s insurance provider, and you should generally wait until you have a new gap lease or loan coverage in place before canceling. Your reimbursement for the gap insurance could take a few days to several weeks to arrive. Here are the requirements for terminating a dealership’s gap insurance.
Locate your vehicle purchase agreement from the dealer
Make sure you have copies of the documents you signed when you purchased your car. Ask the dealership for duplicates if you can’t find them. They might be able to send you copies by email, which can save you time.
Contact the dealer’s gap lease or loan insurance provider
Ask the organization you are now insured by what has to be done to terminate your gap insurance. The request for cancellation may need to be in writing, but you might be able to scan, email, or fax it instead.