When Does Gap Insurance Not Pay? Key Exclusions Explained
What is the reliability of your gap insurance coverage? Understanding the intricacies of your policy is crucial, especially when it comes to the question, “When does gap insurance not pay?” Gap insurance, or Guaranteed Asset Protection, is a valuable addition to many auto insurance policies, offering financial protection in the event of a total loss. However, it’s essential to grasp the situations in which this coverage may fall short. Let’s delve into the limitations of gap insurance to ensure you have a comprehensive understanding of your policy’s scope.
What Is Gap Insurance?
Gap insurance, also called Guaranteed Asset Protection insurance, is an extra kind of car insurance you can choose to get. It covers the difference between what your car is worth and what you owe on your loan or lease if your car gets totally wrecked or stolen. So, if something happens to your car, gap insurance helps make sure you’re not left with a big bill to pay.
The Benefits of Gap Insurance:
Gap insurance has some important benefits that can help you feel more secure and protect your money if your car gets wrecked or stolen.
Financial Protection: First, it helps you avoid a big financial hit by covering the difference between what your car is worth and what you owe on your loan or lease. So, if your car is totaled or stolen, you won’t be stuck paying a big loan by yourself. This is really helpful for people who might end up owing more money than their car is worth.
Peace of Mind: Second, gap insurance gives you peace of mind, especially if you have a loan with high interest or a lease. It’s scary to think about having to pay a lot of money if something bad happens to your car. But with gap insurance, you can relax knowing that even if the worst happens. you won’t have to deal with the money problems alone. This makes life less stressful and lets you focus on other things without worrying about money issues.
Top 10 Reasons when Does Gap Insurance Not Pay:
Like all insurances, you may not be too surprised to learn that GAP Insurance may not always settle. All products have terms and conditions to meet in order for a claim to be eligible and paid.
Here, we provide the Top 10 reasons why your GAP Insurance policy will not pay out.
Your Main Motor Insurer Does Not Pay Out:
The number one reason why a GAP Insurance policy does not pay out. For a GAP policy to work, your main motor insurer must cover the incident you are claiming for and pay out the market value for the vehicle. The GAP Insurance can then top up this settlement. If the motor insurer does not pay out then you cannot claim on the GAP.
Examples of when your motor insurer may not pay out would include when you have been negligent in leaving the keys for the vehicle unguarded. Other examples would include drunk driving or using the vehicle for excluded uses like courier or taxi use.
Another example would be when the vehicle suffers a catastrophic mechanical failure like an engine or gearbox blow-up. Your motor insurance is unlikely to cover this (unless it happened because of a flood, perhaps), even if the vehicle is not economical to repair.
You Do Not Have an ‘insurable Risk’ on The Vehicle:
It means that you have taken the GAP policy out in your name, but you have no potential for a financial loss if the vehicle is written off. An example of this would be where you take a GAP policy in your name, but the vehicle ownership and finance agreement is in someone else’s name. If the vehicle is written off, then you cannot claim for a loss as the vehicle is not in your name.
The Vehicle Is Being Used for Certain Commercial Activities*:
Most GAP Insurance products do not cover some commercial activities with standard cover. It may even be the case when your motor insurer does cover you. One area of commercial use often excluded from standard cover is ‘hire and reward.’ It can include taxis, private hire, courier, and chauffeur work. Other areas of commercial work often not covered would be tuition or driving school vehicles.
*Total Loss Gap does not currently cover hire & reward or driving school vehicles. However, we do have products available with our other brands, including EasyGap.co.uk.
You Have Stopped Paying for The Policy:
You may have elected to pay for the GAP cover on a monthly basis or through a credit agreement. If you stop paying this, then your coverage could end automatically.
You Sell the Vehicle or Change the Owner:
If you sell your vehicle, then the GAP cover normally ceases automatically. It can also be the case if you change the ownership of the vehicle on the V5 document between family members. For example, if a father buys the vehicle and then transfers the vehicle to one of his children, the original purchase invoice for the vehicle is still in the father’s name. The fact that the vehicle has changed keepers to his son or daughter could then prevent him from making a GAP claim.
You Have Already Claimed on The Gap Policy:
GAP Insurance is a ‘one-time-only’ type of cover. You can only claim on it once when the vehicle is written off. If you successfully claim for the vehicle then that is the end of the policy. It is even the case if you have some time left on the cover. If you replace the vehicle you have claimed for, then you will need a new GAP policy for this vehicle.
There Is No ‘GAP’ to Fill:
GAP cover is meant to fill the difference between your motor insurer settlement and the price you paid for the vehicle or your finance/lease settlement. If there’s no difference, your cover won’t make any extra payments. Another example where there may be no GAP is if your motor insurer replaces the vehicle for you. Perhaps your vehicle was brand new, and your insurer has provided another brand-new replacement for you.
It may not happen often, but if it does, then you have no loss to cover. Normally, you will see your GAP cover transferred to your new vehicle free of charge.
Your Gap Insurance Policy Has Expired:
All GAP products have a period of cover. When the policy comes to an end you cannot normally renew or get new cover as you have owned the vehicle too long at this point. The decision of how long you want GAP cover for on your vehicle is one you must make at the outset.
You Are Not Fully Comprehensively Insured:
Most GAP policies will require that you are fully comprehensively insured for the full policy term. If you are only third party covered, then your motor insurer would not pay out for a fault claim or a theft. If your main motor insurer does not pay, then you cannot claim the GAP cover.
Your Vehicle Does Not Appear in The Glasses Guide:
You may have heard of Glass Guide. Insurers and motor dealers widely use it to work out the value of a vehicle. If your vehicle is not listed in the Glasses Guide, then many GAP products will not cover you.
It is simple because GAP is designed to cover the ‘write off’ value of the vehicle. If there are no guide prices to work out the write-off value, then the GAP Insurance underwriters cannot work out what they should be covering.
Imported vehicles and modified vehicles (vans turned into motorhomes aftermarket) are usually excluded from cover, therefore.
It is not an exhaustive list, and there will be other reasons why your GAP cover will not settle if you make a claim. However, if you do your research at the outset, you will find that the GAP cover is quite simple. If you have any questions or queries, please do not hesitate to contact us and we will be more than happy to answer your questions.
Also Read: How to Scare Insurance Adjuster – Tactics for Claim Success
FAQs:
How Do I Know If I Have Gap Insurance?
To determine if you have gap insurance, start by reviewing your auto insurance policy documents. Look for any mention of “gap insurance” or “Guaranteed Asset Protection.” Additionally, contact your insurance provider or check your policy declaration page, which outlines the types of coverage you have. If you’re still unsure, directly ask your insurance agent or company whether you have gap insurance included in your policy.
Do You Need Gap Insurance on a Lease?
Gap insurance is crucial for leased cars. If your leased car is wrecked or stolen and you still owe money, you’ll have to pay the difference between its worth and what you owe. Leased cars depreciate rapidly, so you might end up owing more than it’s worth. Gap insurance saves you from a hefty bill if something goes wrong.
Should I Get Gap Insurance on a Used Car?
Gap insurance is vital for leased cars. If your leased car gets damaged or stolen and you still owe money on it. You might have to pay the difference between its value and what you owe. Leased cars lose value fast, so you could owe more than the car is worth. Gap insurance covers this gap, saving you from a big bill if something happens to your car.
How Much Is Gap Insurance Per Month?
The price of gap insurance changes based on different things like who gives you the insurance. How much your car is worth, how long you’re paying off the loan or lease, and where you live. Usually, it costs between $20 and $40 every year for every $1,000 of coverage. To find out how much it costs each month, divide the yearly price by 12. Remember, some insurance companies include gap insurance with your regular insurance, but others sell it on its own.
How to Get Gap Insurance?
There are several ways to obtain gap insurance:
Through Your Auto Insurance Provider: Many insurance companies offer gap insurance as an optional add-on to your auto insurance policy. Contact your insurance agent or provider to inquire about adding gap insurance to your coverage.
Through the Dealership: If you’re financing or leasing a vehicle, the dealership may offer gap insurance as part of the financing package. However, be sure to compare the cost and coverage options with other providers before making a decision.
Independent Insurance Providers: You can also purchase gap insurance from independent insurance companies or online insurance providers. Shop around and compare quotes from different insurers to find the best coverage at the most competitive price.
Credit Unions or Banks: If you’re obtaining financing through a credit union or bank, they may offer gap insurance as part of their loan or lease agreements. Inquire with your lender about gap insurance options and costs.
Conclusion:
Understanding the limits of gap insurance is really important to protect your money. When you know the situations where gap insurance might not help, you can make smart choices about your insurance. Whether it’s missing payments, changing your car, or trying to cheat the system, knowing about these limits helps you manage your insurance better. So, before you buy or use gap insurance pay, make sure you read your policy carefully to match what you need. This way, you can lower the chances of problems and feel secure, knowing you’re covered if something unexpected happens.
