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How To Know If I Have Gap Insurance

Last modified: Jul 25, 2023

Gap insurance is a form of insurance that can be hugely useful for drivers who have bought a car on finance, offering cover if the car is totaled or stolen while the driver is still paying off the loan. If you’re a driver who has purchased a vehicle this way, you may well be wondering, “How to know if I have gap insurance.” Fortunately, there is a great deal of information out there to help set your mind at ease. 

As you read on, you’ll learn all you need to know about the ins and outs of gap insurance and find out whether you are protected.

Do You Know if You Have Gap Insurance?

When you first bought your car, you must have gone through a lot of paperwork. The chances are that the printout you received at the dealership included a lot of numbers, and you were most interested in the ones that showed how much money you’d need to pay for the car each month. 

The truth is that without going into detail at the dealership, you’re not going to be 100% sure whether you have gap insurance. At this time, the only way to be sure is to contact the dealer or your insurer. They will have this information in their records.

What Is Gap Insurance for Cars?

Here is a basic explanation as to how gap insurance works.

Suppose you bought a car for $35,000. You still owe $30,000 when the car gets totaled in a covered collision. Your collision coverage will reimburse you up to the totaled vehicle’s depreciated value. Let’s say it’s $28,000. If you don’t have gap insurance, you’d have to pay $2,000 out of pocket. But if you have gap insurance, the insurance company will pay $2,000.

If you’re asking yourself, “Is gap insurance worth it?” then bear in mind the well-known fact about auto valuation: from the moment you drive that car off the forecourt, it immediately begins to depreciate. So even if you get into an accident within the first week of owning the vehicle, the difference between the principal of your loan and the present value of the car will surely be significant.

When Does Gap Insurance Not Pay Out?

Gap insurance can be a savior if you’re leasing or financing your vehicle. Usually, you can get a payout within six weeks of any claim. But there is a list of situations in which it might not pay out, though this depends on the provider, among other factors.

You will not receive a payout: 

  • If your main insurer rejects your claim. That may be due to careless driving or a failed sobriety test.
  • If you use the vehicle for commercial purposes, such as driving school or private hire
  • If you have stopped paying the premiums
  • If you have already made a claim on the same gap insurance before
  • If there isn’t a “gap” to fill. If there isn’t a difference between an auto insurance settlement and the original price you paid, your cover will have no difference to make up. 

Bear in mind that the reasons can differ from insurer to insurer. For example, GEICO gap insurance will have different terms than Progressive gap insurance. 

If you took out the loan yourself, you might already know the disqualifying reasons. Alternatively, you may contact the dealer. 

Please note that even though the term “full coverage” sounds like it covers everything, it does not replicate the job done by gap insurance. So, if you’d like to have gap protection, you’ll need to buy it separately.

Purchasing Gap Insurance

If it turns out that you didn’t get gap insurance when you purchased the car, then the good news is that it’s not too late. You may still be able to buy gap insurance, depending on the model year of your vehicle. This is something you will probably want to consider because a serious accident without gap insurance can leave you in a deep financial hole. 

The easiest and probably the cheapest way is to ask your auto insurance company if they can add gap insurance to your existing policy. Don’t forget to compare prices online to make sure you're getting the best deal.

Another option is to purchase a gap policy from the car dealership. But the price will definitely be higher than a major insurer will offer. 

Where Can I Buy Gap Insurance From?

A decent comparison site will show you the prices and benefits of different providers, such as AAA gap insurance, Progressive gap insurance, and others. 

Can You Get Gap Insurance After You Purchase a Vehicle?

Generally, yes. It’s best to contact your insurer and ask whether you can add it to your existing policy. 

Can You Get Gap Insurance on a Used Car?

Bear in mind that if you have a used car, gap insurance is slightly less useful, as used vehicles do not depreciate at the same rate as new ones. Yes, you can get it if you want to, but when you look into how much it costs per month, you may reasonably decide it’s not worth it.

How Long Do You Have to Purchase Gap Insurance?

There is no set rule regarding how long after a vehicle purchase you can buy gap insurance. It can be as long as three years with some insurers. But your options and benefits are greater the sooner you buy it. It’s not so much a matter of how long you have to buy gap insurance as to which providers offer a deal that works for me and how long you can wait.

Do I Need Gap Insurance?

If you’re wondering whether you need gap insurance for cars, it’s really up to you. You don’t have to buy it; you can drive without it, but ask yourself whether you’d be able to deal with a potential shortfall of thousands of dollars if your car were to be written off or stolen. Perhaps that’s a loss you can absorb or at least a risk you can take, but it’s still a conversation you need to have with yourself.

Conclusion: How Do I Know if I Have Gap Insurance?

You can get to know if you have gap insurance by checking your existing car insurance policy and the terms of your loan and lease. You’ll need to pay this insurance until your total loan amount is below the value of your car, which usually takes a couple of years. If your dealer doesn’t offer a replacement car for a first-year write-off, then you should definitely seek out gap insurance options.

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