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Gap / Loan Coverage

Gap or also referred to as Loan Coverage is for autos that have a Loan on them. The intention is for this coverage to pay the difference between the ACV or Actual Cash Value of the Vehicle and the amount owed on the loan financing it. Sometimes a person can get into a situation where they were "upside down" on a car loan where the ACV of the car is worth significantly less than how much that car can be purchased for. This happens quite often in the event a new car is purchased and driven off of the lot. The second the new owner takes posession and drives it, it turns from being a Brand New car into a Used one. Hence the value of the car goes down accordingly. Over time as this person pays the loan down, the value of the car and the loan at some point will cross and the car will eventually be worth more than the loan. Until that point Gap coverage is needed to fill in the "Gap" of loan to value.

One major problem with Gap Coverage offered on insurance policies. You must read it to see what you are getting. Some companies offer Gap but it doesnt cover the difference between the ACV and the Loan, it coveres 25% above ACV. That same company also considers ACV to be Wholesale Blue Book. Generally speaking, insurance carriers will consider an amount between wholesale and retail book as a price, they might also shop for the car at local dealers in the area to come up with a settlement amount. But not all companies are created equal!

GetCoveredUSA.com Insurance Tip: The best place to get GAP coverage is to have it added to your loan. You can easily purchase it after the fact and have it added on.