Does gap insurance cover your deductible in a total loss wreck?

  • by steve
  • Nov 29,2017
  • 6 answers

Does gap insurance cover the vehicle insurance deductible in a total loss wreck? For example: Vehicle was valued at $21,000 of which a $1000 deductible was retained by the auto insurance company, an $8000 loan payoff was sent to the vehicle finance company, and a $12000 payout was given to myself for the total loss. Should not the additional GAP insurance coverage pay the $1000 amount to myself that was retained as a deductible by the auto insurance company?


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Insurance Answers (6)

g last month

Of course not. Your set deductible, which you chose, will be immediately due.

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mbrcatz last month

No. GAP covers the difference between the actual cash value of the vehicle paid by the insurance company - which INCLUDES your deductible - and the loan balance, not counting any negative equity, late fees, missed payments.
Since the payout covered the loan balance, GAP coverage does not trigger at all. It's only for when you are "upside down" on your loan.

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Casey Y last month

No. You seem to understand the concept of gap insurance, but not how deductibles work. Take the value of the vehicle at the time of the loss, that's your insured value. GAP insurance covers the difference between the insured value and the outstanding loan balance.
Your deductible is your co-insurance on this claim...if you were not at fault, you might get this back when your company subrogates (could take a while). If you were at fault, that money is gone.

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A Hunch last month

Gap insurance covers the difference between the value of the car and loan amount.
In your scenario, the value of the car is $21000 but the loan amount is $8000. Gap insurance was no longer in effect since the loan amount is less than the value of the car.
Gap insurance doesn't have anything to do with the deductible amount.

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lucy last month

Put simply, when you have GAP insurance, it NEVER covers your deductible.
Lets reverse the numbers to explain how GAP works.
Vehicle is worth $12,000
You have a loan of $21,000
So insurance would pay the loan company $11,000, since you would owe your $1,000 deductible for the balance of $12,000.
Then GAP picks up the balance of $11,000 (balance) owed on the loan of $21,000 and pays the lender, so the loan is paid off.
GAP is good when you are upside down on a loan, which many people are in the 1st 3 years, since the interest applies 1st and less on the principle, or if you don’t put down a big enough down payment.
But once your loan is (less) than the value of your vehicle, then GAP does not apply, like in your case. .

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StephenWeinstein last month

No

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