How does gap insurance work if car is stolen? This is a question that many car owners find themselves asking after experiencing the unfortunate event of having their vehicle stolen. Gap insurance, also known as guaranteed auto protection (GAP) insurance, is designed to bridge the gap between what you owe on your car and its current market value in the event of a total loss, such as theft. Understanding how this insurance policy functions can help you make an informed decision about whether it’s worth investing in for your vehicle.
Gap insurance works by covering the difference between the amount you owe on your car loan and the actual cash value (ACV) of your vehicle at the time of the loss. When your car is stolen, the insurance company that covers your vehicle’s comprehensive coverage will pay out the ACV to you, minus any deductible you may have. However, if the ACV is less than what you owe on the loan, you are still responsible for the remaining balance.
This is where gap insurance comes into play. If you have gap insurance, it will cover the remaining balance, ensuring that you are not left owing more on your car than it is worth. For example, let’s say you owe $20,000 on your car loan, but its current market value is only $15,000. If your car is stolen and the insurance company pays out $15,000, gap insurance would cover the remaining $5,000, leaving you without any outstanding debt on the vehicle.
There are a few key points to consider when it comes to gap insurance for a stolen car:
1. Eligibility: Not all vehicles are eligible for gap insurance. Typically, gap insurance is available for new or nearly new vehicles that are still under a manufacturer’s warranty. It may not be available for older vehicles or those with high mileage.
2. Coverage Duration: Gap insurance coverage is usually for a specific period, such as the duration of your car loan or lease. It’s important to ensure that your coverage is in place when you need it most.
3. Additional Costs: While gap insurance can save you from financial hardship, it’s important to note that it is an additional cost on top of your regular car insurance premiums. Make sure you understand the terms and conditions of the policy and whether it is worth the extra expense for your specific situation.
4. Claims Process: If your car is stolen and you have gap insurance, you will need to file a claim with both your comprehensive coverage insurance provider and your gap insurance provider. The claims process may vary depending on the insurance companies involved, so it’s important to be prepared and understand the steps you need to take.
In conclusion, gap insurance can be a valuable tool to protect yourself from the financial burden of owing more on a stolen car than it is worth. By understanding how gap insurance works and considering the factors mentioned above, you can make an informed decision about whether it is the right choice for you. Always read the policy carefully and consult with your insurance provider to ensure you have the coverage you need in the event of a stolen vehicle.
