What exaclty does GAP insurance cover?

Question

I'm, having a problem with my past finance company. My car was declared a total loss.

All parties were informed.

My insurance paid out. My finance company filed for GAP insurance. Now I'm being told that I still owe money on the loan.

Because it took GAP about 60 days to pay up. I'm starting to get the feeling that my finance company is making me pay something I'm not supposed to.

Does anyone know if this is right? Can i get charged delinquecy penalties because of GAP no paying right away?

Answer 1

more than likely you are paying the installments that were due until the claim was settled.  gap pays the difference in the loan amt for you minus any payments that are behind or due until the settlement.   so you probably owe 2 months of payments.   gap insurance can be slow to settle on a loss BUT if you did not have it you would have to pay the difference yourself.

Answer 2

Gap covers the difference between actual cash value of your car, and the payoff for that car.  It does NOT cover any late fees, because you didn't make car payments after the accident, it does NOT cover any negative equity you rolled into the loan, and it does NOT cover any taxes/title fees you might have rolled into the loan.

Answer 3

I agree with you.  It sounds as if your finance company is trying to get something out of you that is not owed by you.  GAP insurance is supposed to pay the difference that is owed on (Amount Owed On Loan - Insurance Payment = Gap Payment).  That is the purpose of the insurance.  If you buy a new vehicle, once it leaves the lot it depreciates; therefore, if you total the vehicle after pulling off the lot you owe more on the car than it is worth and the GAP is supposed to provide protection for that.  I would think if the car was a total loss and you had GAP coverage the finance company would have given them a payoff amount good through a particular date and once that amount was paid that would take care of the balance on the loan.  I would definitely check into this further.  Try contacting you GAP insurance to see what was paid and what they were told was the payoff amount and payoff period for the vehicle.

Answer 4

Answer from a General Insurance Agent

Gap Insurance is [x*x redacted x*x]. You may have noticed that it is typically sold by auto dealerships, Not by Real Insurance companies or any Insurance Agent I have ever known.

The fly by night companies set up to issue these policies generally are what we call "mono-line", meaning that it's all they sell, nothing else. The language of the policy usually has so many restrictions and exclusions that even attorneys have trouble understanding exactly what they will pay for. They usually indicate that the coverage is not valid unless a standard auto insurance policy is in place and carry a host of restrictions and exclusions designed not to ever have to pay out.

These polices usually cost anywhere from 600 dollars up to 1600 hundred dollars and the dealership receives a commission of 40 to 60 percent of the amount you paid for it, meaning the dealership profited from 300 to 900 hundred dollars for convincing you to buy it.

We have heard many nightmare stories over recent years about these policies which most Insurance agents don't even consider Insurance. In the insurance industry Gap coverage is lumped into the same category as pre-paid legal scams.

I have only known of one person who ever successfully got paid from a Gap Policy and that was only because she filed a complaint with the state insurance regulators and she was an attorney. So, as you indicate that at least there was some kind of eventual payout you would be the second

The government should really do something about this growing problem.

The only thing I can recommend is to file a claim bide your time and hope there will be an eventual payout.

You may also file a complaint with your state Insurance regulatory authority.

and "Yes" your finance company can bill you for any unpaid balance, Remember you are liable for your finance note, The insurer is only liable by virtue of your insuring contract which is between you and the insurer not between the insurer and your finance company, so it is your job to make sure they pay up in a timely manner.

Good Luck and Happy Motoring