For those with a standard car finance deal that are simply paying off the value of their car, GAP insurance will cover the difference between your car insurance payout and the amount you still owe on your finance agreement. It will clear any negative equity so you won’t owe money for a car you can’t use.
How do you use gap insurance?
Gap insurance claims are how insured drivers get a payout for the difference between their car’s loan or lease balance and its actual cash value (ACV) after a total loss. To file a gap insurance claim, drivers must contact their insurer and provide documentation showing the car’s value and its coverage details.
What does GAP insurance do for a totaled car?
Add gap insurance to your car insurance policy to ensure that you never have to deal with a remaining balance on a totaled car. This coverage pays for the cash value of your car as determined by the insurance company and pays for any deficiency balance left over after you apply the proceeds to your loan.
What to do when your totaled car is not paid off?
So, if you’re in a state without a statute, you may not get help with sales tax. Talk to the insurance adjuster about your state’s situation if your insurer totals your car. Unfortunately, even if you have gap insurance to cover the rest of your loan amount, you won’t get money to put toward a replacement car.
Can a car insurance company cover a totaled car?
Often, the amount an insurance company offers for a totaled car is not even sufficient to cover what is owed on the wrecked car. This may occur if you wreck a new car shortly after buying it. The vehicle has taken its big initial depreciation hit, but you have barely had time to pay down your loan balance.
When does GAP insurance exceed current market value?
It also applies to cars with mechanical problems, such as a blown engine, or a junk vehicle – which would mean that repair costs exceed the current market value of the used vehicle. To start, it helps to understand what GAP insurance is all about.
