Gap Insurance, or Guaranteed Asset Protection Insurance, is a type of auto insurance that helps bridge the gap between the actual cash value of a vehicle and the balance still owed on the financing or leasing. Given the complexity of this insurance, several questions often arise. We’ve gathered the top 50 questions to help you understand Gap Insurance.
1. What is Gap Insurance?
Gap Insurance covers the difference between the actual cash value of a vehicle and the amount owed on it in the event of a total loss.
2. Why is Gap Insurance Needed?
It’s beneficial if you owe more on your vehicle than it’s worth, protecting you from substantial financial loss if the vehicle is totaled.
3. Is Gap Insurance Mandatory?
No, it is typically optional but may be required by some lenders.
4. Where Can I Purchase Gap Insurance?
You can buy it from your auto insurer, car dealership, or specialized Gap Insurance providers.
5. Can I Cancel Gap Insurance?
Yes, cancellation policies vary, but generally, you can cancel within a specific period for a refund.
6. How Much Does Gap Insurance Cost?
Generally, it costs between 5% to 6% of your comprehensive and collision coverage premiums.
7. Does Gap Insurance Cover Theft?
Yes, if your vehicle is stolen and considered a total loss, Gap Insurance can cover the difference.
8. Does Gap Insurance Cover Negative Equity?
Yes, it is specifically designed to cover negative equity in a total loss scenario.
9. Is Gap Insurance Transferable?
Typically no, Gap Insurance is not transferable to a new vehicle or owner.
10. What’s the Difference Between Gap Insurance and Regular Auto Insurance?
Regular auto insurance covers liabilities and damages, while Gap Insurance covers the financial gap in case of a total loss.
11. Can I Get Gap Insurance After Purchasing a Vehicle?
Yes, you can buy Gap Insurance after the vehicle purchase, but policies and timeframes will vary between providers.
12. Does Gap Insurance Cover Engine Failure?
No, Gap Insurance only covers a total loss, not mechanical failures.
13. Does Gap Insurance Have a Deductible?
Gap Insurance itself typically doesn’t have a deductible, but it may depend on the underlying insurance coverage.
14. Can I Get Gap Insurance If I Have a Used Car?
Yes, some providers offer Gap Insurance for used cars, but terms and eligibility may vary.
15. What Happens to Gap Insurance If I Refinance?
Refinancing your auto loan might invalidate your Gap Insurance, so it’s best to consult with your provider.
16. Can I Include Gap Insurance in My Loan Amount?
Yes, some lenders allow the inclusion of Gap Insurance in the financing.
17. How Long Does Gap Insurance Last?
It generally lasts for the length of the auto loan or lease term or until the gap no longer exists.
18. Is Gap Insurance Worth It for Leased Cars?
It may be beneficial if you are leasing a car that depreciates quickly or if you have a long lease term.
19. Can I Get Gap Insurance on a Motorcycle?
Yes, Gap Insurance is also available for motorcycles, depending on the provider.
20. Does Gap Insurance Cover Other Vehicles on My Policy?
Gap Insurance usually applies to individual vehicles, so each one may require separate coverage.
21. Is Gap Insurance Tax Deductible?
For personal use, it is not tax-deductible, but for business use, it may be considered an expense.
22. How Do I File a Gap Insurance Claim?
Claims are typically filed with your auto insurance company, and they handle the claim with the Gap Insurance provider.
23. What Documents are Needed for a Gap Insurance Claim?
You might need a police report, photos of damage, loan or lease documents, and other related paperwork.
24. Does Gap Insurance Cover Diminished Value?
No, Gap Insurance does not cover the diminished value of the vehicle.
25. Does Gap Insurance Cover Non-Accident Damages?
Gap Insurance covers the gap in a total loss scenario, which could be due to an accident or theft, but not minor damages.
26. How Quickly Must I Report a Claim?
Timeframes vary, but it’s advisable to report a claim as soon as possible.
27. Does Gap Insurance Cover Missed Payments?
No, it does not cover missed or late loan or lease payments.
28. What Happens to Gap Insurance if I Sell My Car?
Gap Insurance is usually terminated when the vehicle is sold, and you may be eligible for a refund.
29. Can I Get Gap Insurance If I’m Upside Down on a Loan?
Yes, Gap Insurance is designed for situations where you owe more than the vehicle’s worth.
30. Does Gap Insurance Cover Vandalism?
If vandalism leads to a total loss, Gap Insurance should cover the difference.
31. Does Gap Insurance Cover Rental Cars?
Generally, no, Gap Insurance doesn’t cover rental cars.
32. Can I Purchase Gap Insurance Separately from My Auto Policy?
Yes, you can buy Gap Insurance separately from specialized providers.
33. What Factors Influence Gap Insurance Premiums?
The vehicle’s make, model, age, and loan or lease terms can influence the premiums.
34. Is Gap Insurance Refundable If I Pay Off My Loan Early?
You may be eligible for a refund, depending on your provider’s policy.
35. Does Gap Insurance Cover Voluntary Repossession?
Generally no, voluntary repossession is not covered by Gap Insurance.
36. What if My Insurer Doesn’t Offer Gap Insurance?
You can explore other insurance companies or specialized Gap Insurance providers.
37. Does Gap Insurance Cover a Down Payment for a New Car?
No, it only covers the difference between the actual cash value and the amount owed, not future purchases.
38. Does Gap Insurance Cover Personal Property Inside the Vehicle?
No, Gap Insurance doesn’t cover personal belongings inside the vehicle.
39. How Does Depreciation Affect Gap Insurance?
Since depreciation affects the actual cash value of the vehicle, it may increase the gap that the insurance covers.
40. Can I Get Gap Insurance for a Commercial Vehicle?
Some providers offer Gap Insurance for commercial vehicles, but terms and eligibility may vary.
41. Does Gap Insurance Cover Excess Mileage Charges?
No, Gap Insurance does not cover excess mileage charges on a lease.
42. What Types of Vehicles are Excluded from Gap Insurance?
Exclusions may include certain high-end luxury cars, commercial trucks, and antique vehicles.
43. Is Gap Insurance Available for Electric Cars?
Yes, electric cars can typically be covered by Gap Insurance.
44. Does Gap Insurance Cover Accidents in Other Countries?
Coverage may vary by policy and country, so it’s best to consult with your provider.
45. Can I Have Multiple Gap Insurance Policies on the Same Vehicle?
Generally, no, having multiple Gap Insurance policies on the same vehicle is unnecessary and may be prohibited.
46. How is Gap Insurance Different from New Car Replacement Insurance?
New Car Replacement covers the cost of a new car, while Gap Insurance covers the financial gap between the actual value and the amount owed.
47. Does Gap Insurance Apply to Co-Signers?
As a financial obligation, Gap Insurance may protect both the primary borrower and co-signers.
48. Can Gap Insurance Be Denied?
A claim might be denied if it does not meet the policy conditions or if fraud is suspected.
49. Is Gap Insurance Available for Classic Cars?
Generally, no, as classic cars often appreciate in value, Gap Insurance may not be applicable.
50. How Does the Total Loss Definition Affect Gap Insurance?
The definition of a total loss, as per your policy and jurisdiction, will determine if Gap Insurance is applicable.
Gap Insurance is a valuable financial tool that can protect you from considerable debt in case of a total loss of your vehicle. By understanding these frequently asked questions, you can make an informed decision on whether Gap Insurance is right for you. Always consult with an insurance professional to tailor coverage to your unique needs.