Imagine that you go on a long drive to experience the serenity around you, and suddenly, you get into an accident, and your car gets totaled. Or even worse, it gets stolen from the parking lot or you lose all your calmness when you discover that your favorite vehicle has undergone massive damage.
What makes things even worse is the fact that the loss amount culminates in being more than the actual valuation of your SUV or your sedan, plus there is still a good amount left to pay to clear your car loan.
There is a dilemma about who would come forward to incur the losses. Your regular car insurance refuses to pay the entire amount, and there is a hefty loan to be cleared for a vehicle in scrap and pieces now! GAP insurance comes to your rescue in these cases.
Now the question is, do you need both? Your regular car insurance and GAP insurance? Or is just having GAP insurance sufficient? Before answering this question, let us understand the difference between regular auto insurance and GAP insurance. Also, check out Beem to get up to 40% on your preferred car insurance and protect your vehicle from uncertain mishaps.
Introduction
To get financial help during accidents, one always goes for auto car insurance or comprehensive insurance. When in need, people also go for GAP insurance, which helps when the estimated value of your accidentally damaged car’s value is less than what you own from your insurance.
Gap insurance always comes in handy and helps us financially and protects our finances. Imagine paying your car loan, even more than your car’s worth. This is where the GAP insurance bridges in.
Gap insurance can often only be purchased or filed for a collision or comprehensive insurance claim. Although GAP insurance could be bought from a dealer and allowed your auto insurance to lapse, you’re doing nothing but violating your contract. Dive deep into why gap insurance is essential and why you can only claim it as a customer with your regular car insurance. Keep reading also to discover the risks of relying on GAP insurance alone.
Clearly State that Gap Insurance Does Not Replace the Need for Car Insurance
While discussing gap insurance, you must have this huge question. “Will gap insurance cover a totaled vehicle without its auto or comprehensive insurance?”
No, the answer is simple: if your car does not have insurance, it won’t be able to get GAP coverage.
Now that the answer to your question: “Will gap insurance cover a totaled car without its auto insurance?” has been answered, you might have a new question: “Can car insurance be replaced with GAP insurance and fulfill its needs?”
Again, the answer is simple: Car insurance cannot be replaced with gap insurance, and it cannot replace the need for your regular auto coverage.
You should clearly understand the main moto behind having a GAP coverage. It is not a replacement for your regular car insurance. A Gap insurance is purchased to cover the extra amount—or the “gap”—between your car’s depreciated value and the remaining amount owed on your loan. So if you ever get thoughts such as “If gap insurance will not cover a totaled car with no insurance, then what will?” nothing will. You cannot get coverage on your totaled car without a personal auto insurance policy. Hence, without personal insurance, there would be no gap insurance since there would be no “gap” to fill.
Car insurance can’t be replaced by gap insurance, but replacing gap insurance is most probably purchased by dealers. It needs to be replaced by car insurance. Therefore, be sensible and get auto insurance when buying a car. If required, purchase gap insurance coverage, as well, to handle such unforeseen circumstances where your comprehensive auto insurance policy isn’t enough to cover your entire loss. There is a gap that needs to be filled.
Why Car Insurance is Essential?
The most straightforward answer to this is that it is a law. The law has made it compulsory that if you own a vehicle, you get it insured by an authentic and trusted Insurance agent. There are several other reasons, as well, that motivate you to opt for good auto coverage.
Signing up for car insurance at the time of purchasing a new vehicle is very essential. Dangerous circumstances can occur unannounced, and being careful and attentive is a primary human job. Car insurance covers not only the losses of the car that happened at the time of the accident but also the damages and injuries that may cost more than the car’s worth.
No matter how your car has been damaged, be it an accident, due to fire, theft, burglary, or even terrorism, you are always protected, and your car insurance will efficiently cover all of these situations. Car insurance is a document that will always support other kinds of insurance to be purchased. There are numerous crucial reasons and advantages of purchasing car insurance, including:
Coverage for personal accidents
Car insurance also offers coverage for personal accidents, whether permanent or death. Car insurance covers it all. It has opted for the names of passengers sitting inside the car (available as per the vehicle’s seating capacity).
Third-party liabilities
Car insurance also covers the damage and loss caused to the third party because of you. It covers all your legal liabilities and the damages that happened to the car. It also covers all the injuries or deaths of third parties.
A large number of garages
Many car insurers also offer an extensive network of garages nationwide to ensure customers receive cashless services in case any need arises.
No claim bonus
No claim bonus is essential and an advantage for the customers. It allows them to afford car insurance at an eligible price by offering discounts on premiums every claim-free year.
Gap Insurance Limitations
The prime limitation of GAP is that it is only valid with a proper comprehensive car insurance policy. You can only file for GAP coverage if your regular car insurance policy denies paying for the entire loss.
As discussed earlier, GAP insurance covers the difference between what your car’s ACV will cover for you and how much your car’s actual worth is. To understand this more easily, let’s check out an example. Let’s say you recently met with an accident, and you have $40,000 left to pay on your loan, but your car’s worth is just $30,000, so the remaining difference of $10,000 will be paid by GAP insurance. This is how GAP insurance comes to help you fill out the “GAP” of $10,000.
With all the pros, there’s always one or more cons coming along, and the cons of GAP insurance are its limitations. Gap insurance policies typically have a time limit, often corresponding to the expected depreciation period of the vehicle. You will only be covered if your car suffers a total loss within this timeframe.
The huge limit GAP insurance comes with is its claim limit. A claim limit is the maximum amount an insurance provider must pay. They are determined based on how much your vehicle is expected to depreciate over a certain period.
Does a vehicle have a limited worth for GAP insurance?
A vehicle does have limited worth for GAP insurance as the insurance primarily covers all vehicles. Some will only qualify, especially those worth a certain amount.
Back to Invoice Plus: This policy covers you if your vehicle’s invoice price is up to $150,000 within the first 60 days or up to $125,000 if you’ve had the car longer.
Vehicle Replacement Plus: Similar to Back to Invoice Plus, this policy covers vehicles worth up to $150,000, less than four months old, less than 1500 miles, and purchased in the last 60 days.
Contract Hire Plus: This policy covers vehicles with an initial list price of up to $125,000.
Agreed Value: This policy has a lower limit, so it will only cover vehicles bought from a private seller or those owned for a short time if they’re worth more than $75,000. The value is based on the Glass’s Guide’s retail value at the time of policy purchase.
Risks of Relying on Gap Insurance Alone
Being a car owner comes with its risks and dangers, along with all the advantages. It would be best if you carried the weight of all insurance, which might seem like a burden now but would help you most in unexpected situations. Auto insurance or comprehensive insurance is the most effective and helpful document during unannounced accidents; along with this insurance, people also take advantage of GAP insurance.
But what are the risks of relying on these insurances when all they do is benefit us and help us financially? The risk is when you rely on something other than all of these but on a particular insurance alone. Relying on GAP insurance could be the most significant risk after buying a car, not purchasing auto insurance, and depending on GAP instead. We’ve discussed above how purchasing GAP insurance makes no sense and wastes money if you still need car insurance.
Buying GAP insurance from a dealer to help you fill the GAP between the loan and the worth of your car will not help you as there’s no loan to be paid to the car insurer. The biggest mistake is depending upon the wrong insurance, unexpectedly meeting with an accident, and expecting the same wrong insurance to help you with all the damage caused. If you can afford to take this risk and proceed with just GAP insurance without auto insurance, it can put you in a dangerous situation.
Always prefer purchasing a car or comprehensive insurance before being extra bright and purchasing GAP insurance without knowledge to avoid this risky situation. Be responsible and make decisions maturely, seek knowledge from the right people, or ask for help from your insurer. Car insurers are always present and happy to help and clear all your queries. Don’t shy out and ask them whatever you feel is the right thing to do. Being interrogative and asking continuous questions is way better than being illiterate about important matters and just doing what feels right.
Conclusion
Having gap insurance without car insurance has significant risks. While gap insurance can be beneficial in covering the gap between your car’s value and the remaining loan amount, it does not replace the needs fulfilled by car insurance. Without car insurance, you won’t be eligible for gap insurance, and relying solely on gap insurance is not wise.
Car insurance is crucial for various reasons, covering accidents, damages, and personal injuries. It is a necessary document that supports the purchase of other insurance, including gap insurance. Gap insurance has limitations, such as time constraints and claim limits, making it imperative to understand its scope.
Relying only on gap insurance and neglecting car insurance may lead to financial vulnerabilities in case of accidents or other unforeseen events. It’s essential to make informed decisions, purchase car insurance when acquiring a vehicle, and consider gap insurance as an additional layer of protection. Being responsible and seeking advice from insurance experts can help you find the difficulties and ensure comprehensive coverage for your vehicle. Always prioritize safety and financial security by making informed choices regarding your insurance needs.
FAQs
Why did my Gap Insurance not cover my car?
The main reason why your GAP insurance does not cover your car is that you need comprehensive auto insurance or collision insurance. If you do not purchase or have active car insurance, your GAP insurance will not apply.
Do you get Gap Insurance back if you do not use it?
No, you do not get GAP insurance back if you do not use it. Gap insurance is a one-time payment or a series of installments made when you purchase the policy. Unlike other types of insurance, gap insurance doesn’t offer a refund if you don’t make a claim or if your loan is paid off before the policy expires.
What is the difference between Gap Insurance and car insurance?
Car insurance is a broader coverage that protects against various risks, including damage to your vehicle, injuries, and liability for causing harm to others. On the other hand, gap insurance explicitly covers the “gap” between the actual cash value of your car and the remaining amount on your auto loan or lease.
