Can you buy gap insurance at any time?
You can buy gap insurance at any time after you buy your car. Your car must meet the requirements set out by the insurance company. While those will vary, they are usually:
- The car is under a certain age, usually three years old or less.
- The car is under certain mileage, which can vary.
- You must carry comprehensive and collision coverage if you buy gap insurance from a car insurance company.
Beyond that, as long as you still have a loan on your car, you can buy gap insurance.
When should you get gap insurance?
Many drivers purchase gap coverage at the start of their car ownership to limit risk when driving off the lot.
“You can also purchase gap insurance coverage after the fact. Just be aware that different insurance companies have different rules about when you can do that.” David Straughan, a senior insurance writer at The Detroit Bureau, says.
For example, if you purchase a new-to-you used vehicle, some insurance companies only offer gap insurance for recent model years or cars under a certain mileage. According to Straughan, most insurance carriers won't allow you to get gap coverage after a car is two or three years old.
Comprehensive and collision coverage are a prerequisite for obtaining gap insurance, so you will need to make sure you have both on your insurance policy before you can buy gap insurance, regardless of when you buy it.
Where can you buy gap insurance?
There are a few different ways to get gap insurance: car dealerships and insurance companies.
"These days, many manufacturers offer gap insurance at the dealership when you buy a vehicle," Straughan says. "But you can also buy gap insurance from a number of insurance companies. Not all of them offer it as a product, though, so be sure to ask."
How and when you pay for gap insurance depends on how you got coverage:
- If you purchase gap insurance through a car dealership, it's usually a one-time upfront fee that you pay along with the sales tax, documentation fee, etc.
- If you go through your car insurance company, gap insurance is included with your monthly payments.
Getting a quote from your dealer and your personal insurance company is a good idea if you're looking for the cheapest gap insurance. Remember that the gap insurance cost depends on the amount of money you financed and the vehicle's value.
What is gap insurance?
Gap insurance is a type of car insurance that covers the difference between what you owe on your car loan and the car's current value if it's totaled. This type of insurance coverage is particularly useful for those who have financed a new car and are concerned about the rapid depreciation that occurs in the first few years of ownership.
How gap insurance works
Gap insurance works by providing coverage for the outstanding loan balance if your vehicle is declared a total loss. For instance, imagine your vehicle is stolen, and your insurer determines its actual cash value to be $20,000. However, you still owe $25,000 on your car loan. Without gap insurance, you would be responsible for paying the $5,000 difference out of pocket. With gap insurance, that remaining $5,000 is covered, ensuring you’re not left with a hefty bill. Typically, gap insurance is available for brand-new vehicles or those that are less than three years old, as these are the cars most likely to have a significant gap between their value and the loan amount.
Is gap insurance worth it?
Gap insurance can come in handy if you’re leasing or financing a new car. During the first few years of your lease or loan, you may have negative equity in the vehicle. That means you owe more money on the car than what it's worth.
If your car is totaled or stolen, your auto insurance company compensates you based on the car's actual cash value (ACV). However, you're still responsible for paying off the remaining loan or lease balance.
Gap insurance covers what you owe, so you aren't reaching into your pocket to cover the difference.
Here's an example:
- You purchase a new car that costs $40,000.
- Two years into your ownership, your car gets totaled in an accident, and the car insurance company tells you that the car's depreciated value is now $20,000.
- You still owe $25,000 on the loan. Without gap insurance, you would have to pay the $5,000 difference. But if you had gap coverage, that money would be covered by insurance.
How to choose the right gap insurance provider
Here are some tips to help you buy gap insurance:
- Find out which providers offer gap insurance: Not all insurance companies offer gap insurance, so make sure to check before purchasing a policy.
- Compare rates: Shop around for the best quote and compare rates from different providers.
- Consider the provider’s reputation: Look for providers with a good reputation and high customer satisfaction ratings.
- Check the policy’s terms and conditions: Make sure you understand what is covered and what is not, as well as any exclusions or limitations.
- Look for additional benefits: Some providers may offer additional benefits, such as coverage for delinquent payments or late charges.
By considering these factors, you can choose the right gap insurance provider for your needs and ensure you have the financial protection you need.
Frequently Asked Questions: Gap insurance
Can you get gap insurance on a used car?
You can typically get gap insurance on a used car if it's a recent model. Some insurance companies and car dealerships only sell gap insurance for vehicles that are less than three years old or are under a specific mileage. You should check your insurance provider's requirements, as each company has different eligibility criteria.
Can you get gap insurance when you refinance?
As long as your car meets the gap insurance company’s requirements, you can buy it when you refinance.
Can I buy gap insurance after I purchase a car?
Yes, you can get gap insurance after buying a new or leased vehicle. Just remember that there are usually qualifications based on your vehicle's model year and mileage. For example, you can purchase gap insurance on a car that's six months old, but you may not be able to get coverage on a car that's six years old.
Can I get gap insurance after an accident?
It depends. If you get into a minor fender bender and you're within the eligibility time frame, you can probably still get gap insurance. However, you can’t get gap insurance after an accident that totals your vehicle. At that point, you are stuck paying off your auto loan balance out-of-pocket.
What is the difference between loan/lease payoff coverage and gap coverage?
Loan/lease payoff coverage and gap insurance are the same things. You'll probably find that different insurance companies or car dealerships use these names interchangeably.
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