Gap insurance is a type of coverage that helps protect car owners from financial losses in the event of an accident or theft. It is designed to cover the difference between the balance of a car loan or lease and the value of the vehicle, and only applies if the car is insured under comprehensive or collision insurance, or by the at-fault driver's liability insurance. Unfortunately, Gap insurance won't provide coverage for engine faults. In short, Gap insurance does not cover engine failure.
It only covers the gap between the balance of a car loan or lease and the value of the vehicle, and only if the car is insured under comprehensive or collision insurance, or by the at-fault driver's liability insurance. Gap insurance does not pay for mechanical breakdowns, such as a stuck engine or a broken transmission. However, it does cover your car if it is stolen and cannot be recovered. It works with your comprehensive insurance to cover theft. Comprehensive will pay up to the actual cash value of your car, less your deductible if your car is stolen.
This coverage would then pay the difference between that amount and what you owe for your loan. For example, if you owe $20,000 on a car that is worth $15,000 after an accident, Gap insurance would pay the remaining $5,000. You won't need this coverage once you've paid off your car loan, or even once you owe less than the actual cash value of your car. If you recently purchased a Gap insurance policy, depending on your insurance coverage company, you may be able to receive a full refund if you cancel within a specific period of time (usually 30 days). It's also worth noting that some insurers limit the amount a term insurance policy will pay, often to 25% of the value of the car. If you're looking for car insurance that covers engine problems that aren't related to an accident or a comprehensive claim, you'll need to take out specialized coverage, such as mechanical breakdown insurance or an extended warranty.
Insurance against mechanical breakdowns is usually cheaper per month and offers more flexibility when it comes to mechanics. When dealing with a bank or financial company, Gap insurance knows the conditions, sees the paperwork, etc. Even if you take out a separate emergency insurance policy, you'll still need your state's minimum auto insurance coverage. The rise in the price of motor vehicles, longer-term auto loans, and the growing popularity of leasing in the 1980s created breach protection as a type of insurance for car owners. If you financed your vehicle and additional expense insurance is part of your monthly financed payment for your vehicle, it is doubtful that you will receive any reimbursement for your additional expense insurance. Gap insurance providers' terms and guidelines vary; in general, gap insurance is available for new, used, and refinanced cars, trucks and sports utility vehicles that have been leased, purchased, or refinanced in the past 12 months. For more information on supplementary insurance and whether it's worth buying, see WalletHub's information on this topic.
