How does gap insurance work?
Asked by: Daron Hickle | Last update: May 25, 2025Score: 4.8/5 (45 votes)
What does gap insurance actually cover?
Gap insurance helps pay the difference between what's owed on a vehicle loan and the actual value of it, if it's stolen or a total loss. This difference is what's referred to as the "gap". In general, this "gap" occurs when you buy a new vehicle, the value (actual cash value) can start going down right away.
How does gap insurance pay out?
Gap Insurance Claim: If there is a remaining balance on your loan that the primary payout does not cover, you file a claim with your gap insurer. Loan Settlement: The gap insurance pays the remaining amount owed on the loan directly to your lender.
How much money do you get back from gap insurance?
You'll only receive a refund for the GAP insurance that you haven't used. For example, if you cancel your policy after three months of coverage, you'll only get a refund for the remaining nine months (if you paid for a year of coverage). The amount of your refund is based on how you pay your insurance bill.
How does gap insurance work for dummies?
When you file a qualifying claim, your comprehensive or collision coverage will pay the actual cash value (ACV) of your vehicle, minus your deductible. Your gap coverage may then pay the difference between your vehicle's ACV and the outstanding balance of your loan or lease.
How Does Gap Insurance Work? | Progressive Answers
At what point is gap insurance worth it?
However, gap insurance makes sense when your auto loan balance is likely to exceed the actual value of the car. This usually happens when: You put little or no money down when you financed your car. Your trade-in vehicle was less than what you owed on that loan, and that amount was added to your new car loan.
What happens when your car is totaled but still drivable?
Rebuilt/Reconstructed Title: Once a salvage vehicle has been repaired and inspected, the California Department of Motor Vehicles (DMV) will issue a "rebuilt" or "reconstructed" title for the vehicle. Once you obtain this, you can legally drive the vehicle.
What happens if you total a financed car with gap insurance?
GAP insurance will pay the difference between the ACV paid by your primary insurer and the remaining balance on your car loan. For example, if you owe $20,000 on your loan but your car's ACV is only $15,000, your primary insurance will cover the $15,000, and GAP insurance will cover the remaining $5,000.
Does gap insurance give you money for a down payment?
Gap insurance will only cover what is left on your loan after an insurance company pays out. In other words, no, it won't cover the down payment you made initially because it wasn't part of the loan amount.
Does gap insurance pay your deductible?
Does GAP pay my auto insurance deductible? GAP generally covers your auto insurance deductible up to $1,000.00. However, GAP does not reimburse your deductible in the event of a $0.00 GAP benefit. Please contact Protective at 800-432-4566 between the hours of 8AM-6PM Central Time for further questions.
Why would a gap claim be denied?
If the gap insurance company discovers there was any fraud or misrepresentation (you lied) on your application for coverage, your claim could be denied. The vehicle isn't a total loss. Only total loss claims are covered by a gap policy. The claim exceeds the policy limits.
Does gap insurance write you a check?
If you have gap insurance, it can help cover the difference in the event you have a total loss, minus the policy's deductible. It is important to understand that having gap insurance doesn't mean that your insurance provider will write you a check for what you originally paid for the car.
How long does it take gap to pay off car?
How long does it take for gap insurance to pay? A gap insurance claim can take several weeks to process, though it ultimately depends on the circumstances of the accident or theft that led you to file a claim. Your vehicle insurance company must first determine the actual cash value of your vehicle.
Why would gap insurance not pay full amount?
GAP does not pay out if the insurance company deems your vehicle a total loss and you do not carry comprehensive and collision coverage. GAP does not include costs beyond the difference between your loan balance and the car's value. This means it does not cover missed loan payments or extra rental car costs.
What is the most gap insurance will pay?
The most gap insurance will pay is the full amount left on your loan or lease after your insurer pays your vehicle's actual cash value for a covered collision or comprehensive insurance claim. The exact amount gap insurance will pay depends on the balance of your loan or lease and the value of your car.
Does gap insurance cover payments if you lose your job?
Well, quite frankly, a lot! And that causes a lot of confusion. Here are some of the things GAP insurance won't cover: Car payments if you lose your job or go on disability.
Do you ever get money back from gap insurance?
Lump Sum Payment: By paying off the gap insurance refund policy in advance, you are then entitled to a refund on the unused portion. Monthly Payments: If you pay your premiums monthly, you won't be able to get a refund on any past months. However, you may get a small refund if you cancel early in the month.
Does gap insurance pay you directly?
Gap coverage covers the difference between what you owe on your auto loan and the payout you receive from your insurer if your vehicle is stolen or rendered a total loss. While it does fill in a financial gap, that is not where this coverage gets its name — it actually stands for “guaranteed asset protection.”
Is it too late to get gap insurance after an accident?
If you get into a minor fender bender and you're within the eligibility time frame, you can probably still get gap insurance. However, you can't get gap insurance after an accident that totals your vehicle. At that point, you are stuck paying off your auto loan balance out-of-pocket.
How does gap insurance work through a dealership?
If you're in an accident and the car is totaled, you'll turn to your insurance provider to issue payment. You may owe the difference if you owe more to your lender than your vehicle is worth. GAP insurance covers the difference between the insurance payout and what's left on your auto loan.
What happens if my car is totaled and I don't have gap?
Your collision coverage would pay your lender up to the totaled car's depreciated value — say it's worth $19,000. If you don't have gap insurance, you would have to pay $1,000 out of your own pocket to settle your auto loan on the totaled car.
Will gap insurance pay off my loan?
Gap insurance is supplemental auto coverage, in addition to comprehensive and collision insurance, that pays off a loan balance in the event your vehicle is totaled or stolen and never found and you owe more than what the car is worth.
Who gets the insurance check when a car is totaled?
If you own the car outright, you will receive the check. If not, the check goes to the leasing company or the lender, otherwise known as the lien holder. If you owe money on the vehicle, you should notify the lending company that your car has been totaled.
Is it legal to drive a car that has been totaled?
Some states, including California, require a salvage title for totaled cars legally driven on the road. This entails obtaining approval from the Department of Motor Vehicles (DMV) and adhering to the state's minimum insurance requirements.
Is it better to have a car totaled or repaired?
Repairing your vehicle is cheaper than taking out a loan or paying monthly payments on a brand-new vehicle. It is often in the best interest of the insurance company to total a car, so you will need to look out for your own best interests.