FAQ: Will Gap Insurance Cover a Totaled Car with No Insurance? And How Does Gap Insurance Work?

Navigation

Will gap insurance cover an uninsured car that gets totaled?
When and how does gap insurance cover your car?
How much does gap insurance cover a totaled car?
How much do I have to pay if my gap insurance doesn’t fully cover my totaled vehicle?
Expert(s) Found on this Page

Will gap insurance cover an uninsured car that gets totaled?

My car was recently totaled and I’m worried about getting reimbursed for it. I didn’t have a personal auto insurance policy prior to the incident. Will gap insurance cover my totaled car, without having a standard auto insurance policy?

No, it won’t. Your car must at least be covered by a basic auto insurance policy in order for gap insurance coverage to kick in if it gets totaled. It’s important to purchase insurance responsibly, which means starting with a basic auto insurance policy for any vehicle you purchase.

When and how does gap insurance cover your car?

Gap insurance is designed to help you get reimbursed for the full amount still owed on your loan if your car gets totaled. As soon as you drive your car off the sales lot, it’s already depreciated in value. In the event of a wreck, your insurance company will only pay you for the current cash value of your vehicle, which won’t be enough to pay off the remainder of your loan if it happens within a few months after you buy the car.

Gap insurance is designed to cover the extra amount—or the “gap”—between your car’s depreciated value and the remaining amount owed on your loan. Gap insurance essentially makes everything whole again, by covering the portion left over after your standard auto policy pays out for your car’s current cash market value.

After a couple years have passed, gap insurance becomes useless. By this point your personal auto policy would cover the full amount remaining on your loan and beyond.

How much does gap insurance cover a totaled car?

If you purchase the right amount of gap insurance, it will cover the remaining value of your loan after your car is totaled, after your regular auto policy pays. Let’s say you purchase a $40,000 car, then total it a year later. Your car may only be worth $28,000 by this point, but you’ve still got $35,000 left on your loan. Gap insurance will make up that $7,000 difference not covered by your standard auto policy.

When shopping for your gap insurance policy, you’ll need to work closely with your independent insurance agent to get the amount of coverage that’s right for you. How much coverage you need will depend on the type of car you buy, how much it’s worth, the length of your loan, whether you’ll be making a down payment, and other factors. Be sure to walk away with a policy that makes sense for you.

How much do I have to pay if my gap insurance doesn’t fully cover my totaled vehicle?

You’ll be responsible for any remaining amount on your car’s loan after your standard auto insurance policy pays for the current value, and after gap insurance pays up to the limit specified in your policy. If you purchase enough gap insurance, however, you shouldn’t owe anything in the event your car is totaled—that’s the point of getting gap coverage in the first place.

If gap insurance coverage doesn’t cover a totaled car with no insurance, what will?

Nothing. You must have a personal auto policy in place for gap insurance coverage to kick in if your car gets totaled. Without a personal auto policy, there would be no “gap” for gap coverage to fill, so it doesn't even make sense. Be responsible when purchasing a vehicle and sign up for a standard auto insurance policy, and if you think you’ll need it, you can also purchase gap insurance coverage.