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When you buy a new car, your lender or dealer may ask you to purchase gap coverage. You may even have the option to purchase it immediately at that time. However, it never hurts to research what you’re buying, shop around, and compare insurance quotes.
What is gap insurance?
Meaning “guaranteed asset protection,†spread insurance pays the difference between what you get after a total loss payment and how much you still owe on a loan. When you rent a new car, the amount your insurer covers (provided you’re properly insured) is often less than you might owe. This is because lenders only pay the actual cash value of a car (aka ACV). So that you don’t pay for something you no longer own (or make payments on two cars after replacing it), gap insurance is used to further protect your investment.
How does gap insurance work in New York?
You can only purchase New York Gap Insurance if:
It’s not uncommon for new car buyers to assume that having a loan or lease on a vehicle is the only prerequisite for getting gap coverage. However, the car must meet other criteria as well.
Another misconception is that gap coverage is the same as “new car replacementâ€. This is not true either. Spread coverage only pays the difference between the depreciated value (or ACV) of a car and the amount of your loan remaining. It will not give you the funds you need for a new purchase. That’s not to say that gap insurance still can’t help. By not having as much debt in your name, you will have a better chance of being approved for a new loan.
When do you use gap insurance?
Gap insurance in New York only activates if the car is considered a total loss and impossible to drive. This means that for small dents and scratches, gap insurance is not considered. The vehicle must either be stolen or totaled for the gap insurance to pay the remaining amount of your loan.
Consider the following examples.
Example 1:
You financed a $ 25,000 car a month ago. After a severe storm, you wake up to find that a fallen tree has crushed it. Because it is demolished beyond repair, it is considered a total loss by your insurance provider. Your full coverage plan gives you a payout of $ 20,000, which means you still owe around $ 5,000. By having gap insurance in this scenario, the $ 5,000 outstanding is also taken care of.
Example 2:
You recently financed the purchase of a $ 25,000 car. Because you didn’t pay for the vehicle up front, your lender has asked you to purchase both full coverage and gap coverage. After parking on the side of the street, an oncoming car knocks over an exterior mirror and scratches the door a bit. You contact your insurance company, who informs you that you are covered because you have collision coverage. However, you decide you want more than the repair amount and instead find the full $ 25,000 to start over. Gap insurance would not apply in this scenario because the car is still roadworthy.
Gap insurance vs other coverages
With so many types of coverage available, spread insurance is similar to other types of insurance in that it activates after the occurrence of a covered risk. However, it is unique in that it requires the purchase of full coverage and collision coverage before it can take effect. Gap insurance also does not pay for repairs. It only starts if the car is totaled or stolen.
The table below explains how the gap insurance compares to both full coverage and collision coverage:
| Gap insurance | Full | Collision | |
|---|---|---|---|
| What it covers | Protects you financially if your car is considered a total loss after a covered risk.
DOES NOT pay for repairs or replacement. Pay only the difference between an ACV and the remaining loan amount. |
Pay for repairs or replacement if your car is damaged outside of a collision or after an animal, such as a deer.
Incidents such as fires, falling tree branches or flooding are all covered by a comprehensive plan. DOES NOT pay for any difference between an ACV payment and the remaining loan amount. |
Pay for repairs or replacement after your car is damaged in a moving accident.
Incidents such as hitting another vehicle or hitting a tree or a fence are covered by collision coverage. DOES NOT pay for any difference between an ACV payment and the remaining loan amount. |
| Who offers it | Many insurance companies offer gap coverage, but they may instead call it loan / lease coverage.
It is also possible to buy it from a car dealership. |
Full coverage can be purchased from most insurers. | Collision coverage can be purchased from most insurers. |
Where to buy gap insurance in New York?
Gap insurance is not offered as part of a typical insurance package. It must be added to an existing policy or purchased separately. Many gap insurance providers offer it as a supplement, but some do not. While you research it, remember that gap insurance companies also call it loan / lease coverage. However, the blanket works the same under either name.
Purchasing gap insurance is also possible from most dealerships. However, when you do this, it is often put on the loan itself, which means you will be paying interest on it. Unless it’s offered as a standalone option, which means you only pay up front, purchasing gap insurance through a dealer isn’t always your best. option.
Gap insurance companies in New York
If you are wondering where to buy gap insurance in New York, there are many options. Some of the more popular providers include:
- Allstate – Allstate is the fourth largest insurer in the United States. Including spread coverage, Allstate offers additional coverage options as well as 10 discounts that most drivers can take advantage of now or in the future.
- Mutual Freedom – If you have multiple coverage needs, Liberty Mutual has multiple options. It also offers a good amount of discounts.
- At national scale – Nationwide is often one of the cheapest suppliers for many drivers and tends to perform well with JD Power for customer satisfaction. If you are already with Nationwide, consider speaking with an agent about adding gap insurance to your policy. Adding coverage may not increase your premium too much.
- Progressive – Progressive sells just about any type of insurance you could possibly need, including spread coverage. Like many insurers, he calls it loan / lease coverage instead of gap coverage.
- Travelers – Travelers may be one of the more expensive options on this list, but it’s still a popular supplier. It generally does well in annual customer satisfaction reports from third-party companies like JD Power.
Frequently Asked Questions
How much does gap insurance cost?
There is no fixed cost for gap insurance because many factors affect the cost of gap insurance. The main factor, of course, is the amount of your loan compared to the ACV of the car.
Is gap insurance mandatory in New York?
New York State law does not require you to purchase gap insurance. However, if you are financing or leasing your new car, your lender or dealer will likely ask you to get it.
How to cancel the gap insurance?
You can probably cancel your gap insurance online, but if not, you can always call and speak to an agent. If you’ve prepaid, you can usually expect a refund to your bank account after the cancellation is processed.
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