Gap insurance is a type of insurance that covers the difference between the actual cash value of your vehicle and the remaining balance of your loan or lease. The most that gap insurance will pay out is the full amount left in your loan or lease balance. The exact amount that gap insurance will pay depends on the actual cash value of your vehicle, the remaining amount of your loan or lease, and your insurance company. Some insurance policies may limit the total amount you can receive.
For example, Progressive's Gap insurance policy covers up to 25% of the vehicle's actual cash value (ACV). This payment may not cover the entire loan if your car has depreciated significantly. When you buy a policy at the dealership, you can generally choose to pay the premium up front or add it to your loan. If you include the cost in your monthly loan payment, you'll pay interest on the price of the policy, which will further increase your cost. Progressive offers loan or lease repayment coverage, which is like insurance without coverage. The main difference is that loan or lease cancellation coverage is limited to no more than 25 percent of the value of your vehicle.
Showing proof of temporary coverage to law enforcement wouldn't help if they asked you for proof of insurance. To calculate your insurance for additional expenses, you only need to deduct the current value of your vehicle from the remaining balance of your loan. Yes, you can take out term insurance at any time before a car loan or lease is canceled, but only with some coverage insurance providers, since others will only sell coverage to the first owner of a car whose model is newer. If you need an insurance reimbursement for additional expenses because you are selling or redeeming the car, be sure to wait until the car no longer legally belongs to you before canceling your additional expense insurance insurance. Gap insurance covers the “gap” in dollars between what a car is worth and what is owed in the loan or lease, in the event of an accident or theft involving a total loss of the vehicle. If you want to buy GAP insurance, you have two main options: the dealer or an insurance company.
Without supplemental insurance, drivers may have to pay the remaining balance of the loan or lease of a vehicle that they can no longer drive. The quotes referred to were publicly obtained from insurers' files and should only be used for comparison purposes. This information is not an insurance policy, does not refer to any specific insurance policy, and does not modify any provision, limitation or exclusion that is expressly stated in any insurance policy. If your car is wrecked or stolen and you're “backwards” with the loan, you'll be happy to have GAP insurance. If your financed car is destroyed or stolen, GAP insurance will cover the difference between the value of the car and the amount you owe on your loan. Then, you must provide the appropriate documentation to your insurance provider, such as the proof of sale or the payment letter for the car.
If you no longer want to have your current supplemental expense insurance policy because you think you paid too much for it, compare prices to see if it's possible to get a cheaper policy. The only reason to buy coverage insurance from a dealer is if you can't find the coverage options you're looking for elsewhere. GAP insurance can help protect you from financial loss if your car is destroyed or stolen before your loan or lease is canceled.