What is gap insurance and How does it work in New York?

Gap coverage is an optional insurance policy that you can purchase if you want additional coverage for your car. Although gap insurance is not required by law in New York, you may still be required to purchase it. For example, let's say you have to rent a vehicle. But even if it's not needed, gap insurance can give you peace of mind that all cars will inevitably experience it. We'll explain what gap insurance is and whether it might make sense for you.

What is gap insurance?

Gap insurance, or guaranteed asset protection insurance, is a type of auto insurance coverage. This policy covers the difference between the amount owed on your auto loan and the actual cash value (ACV) of the vehicle in the event of an accident where the vehicle is a total loss. Generally, insurance will only cover ACV. If this amount is less than the amount owed on your loan, you are usually left to cover the rest yourself. With gap insurance, you have the full amount covered, even if the ACV is less than the remaining loan balance.

How does gap insurance work in New York?

You can only buy gap insurance in New York if:

• If you are the original loan/lease holder.

• The age of the vehicle is less than 2-3 years.

• You have a comprehensive car collision.

It is not uncommon for new car buyers to assume that having a car loan or lease is the only condition for getting the gap covered. However, the vehicle must also fulfill additional requirements.

Another misconception is that covering a gap is the same as "exchanging a new car." This is also incorrect. Gap coverage only pays the difference between the vehicle's depreciated value (or ACV) and the remaining amount of your loan. It won't give you the money you need to buy a new one. This does not mean that gap insurance cannot be beneficial. With less debt to your name, you are more likely to be approved for a new loan.

When do you use gap insurance?

Gap insurance is activated in New York only if the vehicle is considered a total and irrecoverable loss. This means that for minor scratches and bumps, the gap lock does not work. The car must either be stolen or collect gap insurance to pay off the remaining loan amount.

Consider the following examples.

Example 1:

I financed a $25,000 car a month ago. After a heavy storm, you find that a fallen tree has destroyed it. Because it has broken down beyond repair, your insurance provider has deemed it a total loss. Your comprehensive coverage plan provides you with a $20,000 payment, which means you still owe about $5,000. By assuming gap insurance in this scenario, the remaining $5,000 is also taken care of.

Second example:

I recently financed a $25,000 car purchase. Since you have not made direct payments on the car, the lender is asking you to buy both full coverage and gap insurance. After standing on the side of the road, an oncoming car knocks on the side mirror and lifts the door slightly. You can call your insurance company, which tells you that you are covered because you have collision coverage. However, you decide that you want more than the repair cost and instead want the whole $25,000 to begin over. In this scenario, the gap lock will not kick in because the car is still drivable.

Gap insurance versus other coverages

With so many different forms of coverage available, gap insurance, like other types of insurance, becomes active as soon as a covered danger arises. However, it is unique in that it requires the purchase of comprehensive coverage and collision coverage before it can take effect. Gap insurance also doesn't cover any repairs. It only starts if the vehicle has been collected or stolen.

The table below shows how gap insurance compares to comprehensive and collision coverage:

What does it cover?

Gap insurance:

Protects you financially if your vehicle is deemed a total loss after a covered peril.

Do not pay for repairs or replacements. Pays only the difference between the ACV and the remaining loan amount.

Comprehensive

It covers repairs or replacements if the car is damaged due to an animal, such as a deer.

Incidents such as fire, falling trees or flood waters are covered under a comprehensive plan.

ACV does not cover any difference between repayment and outstanding loan amount.

Collision:

Pays for repairs or replacements after your car is damaged in a moving accident.

Incidents such as hitting another vehicle or hitting a tree or fence are covered under collision coverage.

ACV does not cover any difference between repayment and outstanding loan amount.

Who offers it

Gap insurance:

Many insurance firms provide gap coverage, however it may be referred to as loan/lease coverage instead.

It is also possible to purchase it through a car dealership.

Comprehensive:

Comprehensive coverage can be purchased from most insurance companies.

Collision:

Collision coverage can be purchased from most insurance providers.

Where to buy gap insurance in New York?

Gap insurance is not offered through the regular insurance package. It must either be added to an existing policy or purchased separately. Many gap insurance providers offer this as an add-on, but some do not. While looking for it, remember that gap insurers also call it loan/lease coverage. However, coverage works the same way under either name.

It is also possible to purchase gap insurance through most dealerships. However, when you do, it's often put toward the loan itself, which means you'll pay interest on it. Purchasing gap insurance through an agency may not always be the ideal option for you unless it is offered as a stand-alone option, which means you only pay for it up front. However, keep in mind that the cost of auto insurance can be influenced by a variety of circumstances.

Gap insurance companies of new york

If you're wondering where to buy gap insurance in New York, there are plenty of options. Among the most well-known service providers are:

Allstate - Allstate is the 4th largest insurer in the U.S. Including gap coverage, Allstate has additional coverage options plus 10 discounts that most drivers can take advantage of now or in the future.

Liberty Mutual - If you have multiple coverage needs, Liberty Mutual has many options. It also has a good amount of discounts.

Nationwide - Nationwide is one of the cheapest providers of frequent drivers and JD's for customer satisfaction. Good performance with strength. If you're already across the country, consider talking to an agent about adding gap insurance to your policy. Adding coverage likely won't increase your premiums much.

Progressive - Progressive offers and sells any type of insurance you might need, including gap coverage. Like many insurance providers, it is called loan/lease coverage rather than gap coverage.

Traveler - Traveler may be one of the more expensive options on this list, but it's still a popular provider. This is usually a J.D. Performs well in annual customer satisfaction reports from third-party companies such as Power.

These are some of the best auto insurance providers in New York. Always search about for the best deal on insurance.