How Does GAP Insurance Cover Theft?
First of all, what is GAP?
GAP Insurance or Guaranteed Auto Protection insurance is an insurance policy in place to cover the difference between the cash value of the vehicle at the time it was declared a complete loss, and the loan value of the vehicle.
Also, they usually offered at the time of purchase. Some states require that the Guaranteed Auto Protection be offered at the point of purchase. The GAP insurance may be required by some lending institutions as a condition before availing a loan. There are many ways for you to obtain your GAP insurance. It may be offered at the dealership and it may be also offered by your insurance company.
Insurance would not cover the entire loan amount if you have lost your vehicle to theft. This would only cover the difference of your vehicle’s actual cash value and the loan balance. The regular Vehicle insurance would be covering your vehicle’s actual cash value. In some instances, the GAP insurance also covers the insurance deductibles.
Stolen vehicle claims can take a month or even more if the insurance company encounters some red flags. This is also to make ample time for the authorities to recover the vehicle. It has no significance if the vehicle is recovered and is fully operational. Standard vehicle insurance would take care of the damages if there’s any. If the vehicle is recovered and the evaluator ruled that the vehicle is a total loss, the insurance company would cover the actual cash value of the vehicle, and it would cover the difference between the loan balance and the actual cash value.
It is important to maintain payments on your vehicle loan and insurance while the vehicle is still being investigated for theft. While there is an ongoing investigation, the vehicle would not be considered as a total loss yet. This is to prevent you from repercussions resulting from late payments or non-payments. You might have some serious problems in your credit report and your insurance company once you have gone through the process. Whatever the result of the investigation is, whether the authorities recover your vehicle or not, you would still be responsible for any dues before your vehicle is considered as a total loss due to theft.
GAP insurance does not cover the overdue payments on a vehicle loan. If you had outstanding payments at before the vehicle was considered a loss due to theft, your GAP insurer would not cover your overdue balance. The remaining loan balance is the balance that needs to be paid in the future. Overdue balance is the balance that you should have paid already.
The general rule is to always be up-to-date with payments. They provide a great way to minimize your risks, but it would be very important to lessen the risks yourself. Even if your vehicle is insured, it would only be wise to also secure the vehicle to avoid theft as well.