Before you learn how GAP insurance works, it’s a good idea to understand what makes a physical damage loss a total loss.
If you receive a letter or a phone call from your insurance company informing you that your vehicle has been deemed wrecked, it implies that the insurer has estimated that it will cost more to repair your automobile than it is worth.
Companies will send an estimator to your location to take photos of your car and provide repair quotes to the adjuster.
After reviewing the repair estimates, the adjuster will determine the vehicle’s worth at the time of the loss.
The replacement cost minus depreciation is referred to as the Actual Cash Value. Because the Actual Cash Value of your car is the highest amount your insurance company will pay, it will be classified as a write-off.
Do I get a check from gap insurance?
You’ll get a check for the value of a car similar to yours on a used-car lot. This is referred to as the vehicle’s actual cash worth by insurers. That particular gap is not covered by gap insurance. The reimbursements are calculated on the basis of actual cash worth rather than replacement value, which can assist you avoid financial losses.
How does loan lease gap coverage work?
A vehicle’s value depreciates the moment you drive it off the lot. You may owe more than the vehicle is worth if you finance or lease your vehicle and it is totaled in an accident (which is the maximum amount you can recoup from basic auto coverage).
If your car is totaled due to a loss covered by your comprehensive or collision insurance, loan/lease gap coverage pays the difference between the actual cash value of your vehicle and the unpaid balance on your loan or lease. For example, if your automobile is worth $10,000 but you still owe $15,000 on your loan or lease, loan/lease gap coverage will pay off the remaining $5,000 so you don’t have to pay the rest out of pocket.
Carry-over amounts, lease penalties, late payments, and extended warranties are not covered by loan/lease gap coverage. To be eligible for this coverage, you must be the initial owner of the financed or leased vehicle, and the automobile must have been purchased from a new car dealer not a prior owner.
What do you need for a gap claim?
- Your gap insurance provider should be able to supply you with a copy of your original gap contract.
- Original sales contract obtained from the dealership where you purchased your vehicle.
- Manufacturer’s invoice or other documentation demonstrating the vehicle’s original value available at the dealership
- The dealership, bank, or credit union that holds your lease or loan can provide you with a financing contract for the lease or loan.
- The dealership, bank, or credit union can provide payment history for the lease or loan.
- A copy of the check from the insurer that paid for the whole loss – this can be obtained from your regular insurance provider.
- Your typical insurance provider can provide you with a settlement statement that breaks down the amount on the check.
Despite the fact that these documents are typically requested, each insurer’s requirements for submitting a gap claim are slightly different. Most gap insurers publish lists on their websites, and you can always phone or email them to make sure you have everything you need. Also, double-check that your gap insurance provider has your most up-to-date contact information.
If your claim is accepted, most gap insurance will deliver a cheque, usually straight to the motor lease or loan provider, within four to six weeks. However, you may speed up the process by keeping track of any requests for more documents and contacting your insurer with any questions or to inquire about the status of your claim.
Considerations for Canceling Your GAP Insurance
Before we get into the specifics of requesting a GAP refund, there are a few items to consider that could influence your decision:
- You’ll only get a refund if you haven’t used your GAP insurance. If you cancel your policy after three months of coverage, for example, you will only be reimbursed for the remaining nine months (if you paid for a year of coverage).
- Your return amount is determined by how you pay your insurance bill. You won’t obtain a refund if you pay monthly because you’ve only paid for the coverage you’ve received thus far. The amount of your return will be determined by how far into your policy you were when you canceled it if you paid your insurance in one lump sum.
- It usually takes four to six weeks to recover your money once you cancel your policy and request a refund.
- You must request a GAP insurance refund. Most insurance companies do not automatically include them in their policies.
Instructions for Canceling Your GAP Insurance Policy
Let’s get started with the step-by-step instructions. The instructions following are based on the assumption that you purchased your GAP insurance from your insurance company rather than the car dealership. (Hint: Getting it from your insurance carrier is far less expensive.)
- Contact your insurance provider to begin the refund procedure. Inform them of your name, policy number, and your desire to terminate your GAP insurance and receive a refund for the remaining coverage. Remember, you shouldn’t do this until your car has been lawfully sold or swapped, or your loan has been paid off.
- Gather and send paperwork to your insurance company proving that your car was exchanged, sold, or that your loan was paid off early.
- To complete the cancellation process, fill out and submit any forms that your insurance company asks.
- If it’s still unclear, tell your provider you want a return for the GAP insurance coverage you didn’t utilize. Within four to six weeks following your cancellation request, you should receive a cheque from your insurance carrier.
How long does it take gap claims to process?
After a claim is submitted, gap insurance takes 5-45 days to pay the policyholder. To obtain a gap insurance payout, the car must first be certified a total loss, and the claim must be accepted by the insurance company.
State rules also govern how long an insurance company must pay out on a claim. In Texas, for example, insurers must pay within five days of receiving a claim. Some jurisdictions, such as Massachusetts, do not have a defined limit, instead requiring insurers to pay within a “reasonable” time frame.
How does gap insurance work on a financed car?
If your automobile is totaled or stolen, and you owe more than the car’s depreciated worth, gap insurance might help you pay down your loan. Gap insurance bridges the gap between your car’s depreciated value and the amount you still owe on it.
How long does it take for gap insurance to pay off your car?
After a claim, your motor insurer may wait anywhere from five to 45 days to pay out gap insurance. The actual period of time depends on the complexity of your claim as well as state rules. Typically, your insurance company will send these payments directly to your lienholder or lessor.
What is the most gap insurance will pay?
If you have comprehensive and collision coverage, and your vehicle is totaled due to a covered risk such as an accident, theft, fire, flood, tornado, vandalism, or hurricane, your insurer will pay you the actual cash worth of your vehicle. This sum is frequently far less than the remaining balance on your loan or the amount needed for a lease repayment.
When your actual cash value (ACV) payout is less than what you owe on your lease or loan, the “gap” you may be left paying is the result of this financial shortfall. Gap insurance could come in handy in this situation.
What does gap insurance cover?
Gap insurance will reimburse the difference between the vehicle’s ACV and the current outstanding balance on your loan or lease if it is stolen or totaled. It may also cover your usual insurance deductible.
Car owners frequently believe that if their vehicle is wrecked, it will be replaced for the price they paid, or at the very least the amount owed. This is not the case. As a result, several auto insurance companies offer gap insurance (also known as loan/lease payoff insurance) as an add-on policy.
To get gap coverage, you must also have comprehensive and collision coverage, but these are normally required if you lease or loan your vehicle.
What isn’t covered by gap auto insurance?
- Extensive warranties, credit life insurance, and other insurance purchased as part of the loan or lease
- Wear and tear, past damage, towing, and storage costs are subtracted by the primary insurer.
- Only factory-installed equipment is covered, as opposed to equipment added by the buyer.
- Mechanical difficulties, such as engine or transmission breakdowns, or any other car issues that aren’t covered by your auto insurance policy
Does gap insurance cover theft?
Yes, gap insurance protects you if your automobile is stolen and not found. It works in conjunction with your comprehensive insurance to protect you from theft. If your automobile is stolen, comprehensive will pay up to the actual monetary value of your car, minus your deductible. The difference between that amount and what you owe on your loan would be covered by this coverage.
Can you cancel gap insurance?
Is it possible to cancel gap insurance? Yes. Gap insurance will no longer be worth it once you have less money to pay off on your loan than the real value of your car. When you’re ready to cancel your gap coverage, the good news is that you’ll be able to earn a prorated refund.