Gap Insurance Providers to Avoid

July 1, 2013

Gap car insurance is a way to insure that the settlement you get from your gap auto insurance providers is at least enough to pay for any auto loans that you took out in order to pay for the car. Many people these days have never even heard of gap insurance. This is because most car dealers or auto loan companies leave this type of insurance off of your policy unless you specifically ask for it. If you do not know if you have gap auto insurance, you should check right away, and make sure to apply for a policy that includes gap insurance as soon as possible. While gap auto insurance is by no means a scam, (its prices are set by the state government) there are some auto insurance companies that offer gap car insurance that you should avoid. Two of the most common types of gap insurance providers to avoid are listed below.

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Gap Insurance Directly from the Car Dealer

The dealership is not at all trying to help you save money when they offer you gap insurance. Chances are, they know the real value of your car much better than you do, and they will mark up the price of gap insurance to significantly more than the actual cost of coverage.

Companies that Offer Excessively High Rates on Gap Insurance

Many insurance companies will convince more suggestible people to buy their gap car insurance without considering the options offered by other companies. Since it can be difficult for a customer to know how much they should be paying for gap insurance, get quotes from many different companies to compare prices.

Related Questions and Answers

Do you Have to Fix your Own Car if you Have Gap Insurance?

Gap insurance does not fix your car. It pays the difference between your collision car insurance payout and the amount still owed on your car loan. Gap insurance does not normally kick in unless the vehicle is deemed totaled by the insurance company. New cars depreciate quite quickly, and often a driver will find themselves owing more on the vehicle loan than the insurance company is willing to pay out for damages. When this happens, gap insurance kicks in and makes up the difference between the two. Carrying gap insurance is an excellent idea if you have a newer car and a car loan out against it.

Do you Have to Make a Car Payment After an Accident for Gap Insurance to Pay it Off?

No, you do not need to make a car payment if gap insurance has kicked in on your totaled or stolen vehicle. Gap insurance only kicks in if a car is totaled or stolen. Gap insurance makes up the difference between the car insurance payout and what you actually owe on the vehicle. New cars depreciate quite quickly, and it is quite common for a driver to owe more on a vehicle than the insurance company is willing to pay out in the event of it being totaled or stolen. Insurance companies determine the actual cash value by taking the cost of the vehicle and subtracting for depreciation. This is the amount they will pay out for a stolen or totaled vehicle.

Will Gap Insurance Cover a Totaled Car?

If you have gap insurance cover on your vehicle it will pay the difference between your insurance payout and the amount you owe on the vehicle. Gap insurance does not pay for your totaled vehicle, it is only responsible for the difference between your collision insurance payout and the amount owed on your loan. New vehicles depreciate quickly, as soon as you drive them off the dealer lot. In many cases, the car will be worth less than you owe on it within a few weeks. Gap insurance can be a real lifesaver if your vehicle is totaled in the first three years of its life.