Can I Get Gap Insurance After My Car Is Totalwd

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How does GAP insurance work after a car is totaled, and when might you need this kind of coverage? You may have heard the old saying that a car's value depreciates by 25 percent the moment you drive it off the lot. While it's not likely to be that much, there are a number of estimates out there that anticipate a loss of up to 11 percent in value on the first day you own the car. That means, quite simply, that you're going to owe more on your car than it's worth if you took out a loan, a condition known as 'being underwater' or 'upside-down' on your payments.

GAP insurance, or 'Guaranteed Auto Protection' coverage, exists to protect you from that condition. If you're in an accident where the car is totaled but you're still underwater on payments, GAP coverage is there to cover the difference between what the insurance company gives you and what you actually owe. As HowStuffWorks points out, this allows you to operate with a clean slate rather than continuing to pay off a car you don't own anymore.

Who Needs GAP Coverage?

So, how does GAP insurance work after a car is totaled? Esurance explains that, in its simplest, most straightforward application, GAP coverage protects anyone who is upside-down on their payments. That means that if you have negative equity, owing more on your car than it's worth, GAP coverage is there to protect you. This condition can last for just a few months to a year or more and can persist or recur if you miss one or more payments. The clear-cut case for needing GAP insurance is if you're in this situation.

Likewise, as Insurance.com points out, many dealerships that lease vehicles will require lessees to secure GAP coverage. This is because lease insurance covers only the cash value of the car, and if you end up totaling it, the dealership stands to be out a lot of money. Though you'll still be responsible for paying off the cost of the difference between the market value and lease balance, there's a fear that without the leased vehicle, many will simply walk away. GAP coverage assures that the costs will be covered.

Is It Worth Getting GAP Coverage?

Just as with any kind of coverage, it's really up to you whether it's worth getting GAP coverage, and it comes down to the value of your vehicle and pure dollars and cents. Some people may be worried that GAP coverage will make their premiums go up.

The truth is that GAP insurance represents just a small part of your overall insurance package, and it can save you a lot when you need it. Sure, you may hope you never need it, but that's the case for all insurance, and when you consider that the overall cost of GAP coverage will represent just about 5 percent to 6 percent of your premium, it's not that much. You're talking about a difference of about $20 on a $400-per-year policy, according to Credit Karma.

Choosing the Right GAP Insurance

You can secure GAP coverage for your vehicle either from the dealer or from your insurer. Naturally, getting it directly through your insurance company allows the ease of adding it straight to your policy. Not every insurance carrier offers this kind of coverage, however, so while it can save you money, it may not be an option and you'll need to discuss it with your provider. In general, to have GAP coverage you'll also need to carry both collision and comprehensive. If you're buying a new car, this is standard practice anyway.

If you can get GAP coverage through your insurance company, it's usually cheaper. Alternatively, you can often secure it from the dealership. In this case, the premium for the coverage will often be added to your monthly payments.

When to Cancel Your GAP Coverage

Without exception, it only makes sense to carry GAP insurance when you're still upside down on your car loan. If you're no longer making payments on the car, or you no longer owe more than the car's base value, then GAP coverage is an extraneous expense on your insurance policy, and you should be sure to cancel it so you're not paying that extra few bucks a month for nothing.

What GAP Insurance Doesn't Cover

Another thing that's important to remember is that GAP insurance is a very specific kind of coverage that exists to provide a very specific protection. It's only in place to cover the difference between your car's value and what you still owe on it, and that doesn't include your deductible. It's not there to cover everything your normal insurance doesn't offer. As Fox Business explains, there are a range of things that GAP insurance doesn't cover. These include:

• Your car payments if you suffer financial hardship, resulting from any circumstance
• Repairing your vehicle if it's damaged but can still be driven
• The value of a car that has been stolen or repossessed
• Loan balances that you roll over into a new loan
• Down payments you make on a new car
• Extended warranty costs on your existing car or a new one
• Rental car fees while you're without a car
• Your car's reduced value if you're in an accident but it's still drivable

Remember, the answer to how does GAP insurance work after a car is totaled is that it just covers the difference in costs. It doesn't cover anything else.

Saving Money on GAP Coverage

If you owe more than your car is worth, GAP coverage can provide important protection. If you do decide that you need GAP coverage on a new vehicle, take the right steps to save money on your insurance. Start by calling around to compare quotes from many different insurance providers. Don't be afraid to tell each of them what the others are offering — this can work in your favor as they bid to offer the best rates.

Information and research in this article verified by ASE-certified Master Technician Duane Sayaloune of YourMechanic.com. For any feedback or correction requests please contact us at research@caranddriver.com.

Sources:

https://money.howstuffworks.com/personal-finance/auto-insurance/gap-insurance-car-totaled.html/

https://www.esurance.com/info/car/myth-gap-insurance-pays-for-any-totaled-car

https://www.foxbusiness.com/features/what-gap-insurance-does-and-does-not-cover

https://www.insurance.com/auto-insurance/auto-insurance-basics/owe-more-than-totaled-car-worth.html

https://www.creditkarma.com/auto/i/what-is-gap-insurance/

https://www.caranddriver.com/news/a15338986/mind-the-gap-insurance-what-to-know-about-this-auto-dealer-add-on/

https://www.caranddriver.com/news/a18672962/take-these-steps-to-save-on-car-insurance/

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Can I Get Gap Insurance After My Car Is Totalwd

Source: https://www.caranddriver.com/car-insurance/a32731255/how-does-gap-insurance-work-after-a-car-is-totaled/#:~:text=If%20you're%20in%20an,and%20what%20you%20actually%20owe.

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