Does GEICO Offer GAP Insurance Coverage?

Fran
Dani Milton
March 24, 2021

Most people are ecstatic when a financing company greenlights their purchase for a new auto loan. They enjoy the process of visiting websites and searching through dealerships to find their favorite car model, make and color. They also take out a new auto insurance policy to protect themselves and their cars.

Unfortunately, unexpected events can happen even with the best preparation. A distracted driver can jump a median and crash into a car, totaling it. A thief can steal their automobile in the middle of the night. A rainstorm can cause a local creek to flood, damaging their new vehicle's engine. The insurance company may pay a settlement based on the actual cash value (ACV) of their car, which may not be enough to pay off your car loan. If it doesn't, you may have to pay a gigantic bill. Gap insurance can pay off the remaining amount you owe on your car loan. If you're shopping for car insurance, you may wonder if GEICO offers GAP coverage to its customers. In this article, you'll learn if GEICO provides GAP coverage to customers. You'll also find out how this insurance can protect you.

Does GEICO Offer GAP Coverage?

No, Geico doesn’t offer Gap Coverage at this time. It is unknown at this time whether the company will offer this insurance

in the future. Several insurance companies offer Gap insurance to customers. They include:

  • AAA
  • Allstate
  • American Family
  • Ameriprise
  • Central Mutual
  • Chubb
  • CSAA Insurance Group
  • Esurance
  • Farmers
  • Mapfre
  • Metlife
  • Nationwide
  • Plymouth Rock
  • Progressive
  • Safeco
  • State Farm
  • Travelers
  • USAA

What Is GAP Coverage?

Guaranteed Asset Protection (Gap) insurance is an optional coverage that you can purchase when you lease or buy a new vehicle. It pays the difference between the amount you owe auto loan and the insurance settlement based on your vehicle’s actual cash value (ACV).

When calculating an ACV, insurers consider how much an automobile has depreciated. According to the Insurance Information Institute, brand new cars begin to lose their value the moment they leave the dealership’s lot. Most vehicles lose 20 percent of their value within a year. The settlement most individuals receive won’t cover the remaining amount they owe on their loans. This insurance is complimentary coverage. You will need to buy collision and comprehensive before you'll get Gap insurance. Most financing companies require drivers to carry collision and comprehensive coverage until they have paid off their vehicles.

Collision pays for your vehicle damage if a covered accident involving a collision occurs with another vehicle.

Comprehensive covers losses or damages you may incur by covered events such as theft, vandalism, hail that are not related to a collision.

Although Gap insurance is optional, some lenders require it, especially if you lease a vehicle. When they mandate it, they will include it in your loan or lease agreement. This coverage will pay for your automobile, regardless of your fault in an accident. This insurance will give policyholders peace of mind if you still owe money on your car if it’s stolen or totaled. Most insurance settlements don’t cover the entire loan amount you owe. Gap coverage will pay off the difference between your car’s ACV and the amount you’ll need to pay off your loan. These policies will rarely cover any deductible you must pay.

What Gap Insurance Does and Doesn’t Cover

Are you about to take out a loan on a new vehicle? You may wonder what Gap Insurance will (and won’t) cover on your upcoming purchase. Gap insurance policies cover the following situations:

  • Negative equity - The difference between your vehicle’s worth and the amount you owe the bank
  • Car theft

Gap Insurance won’t reimburse drivers in the following situations:

  • Bodily injury
  • Property damages to non-totaled vehicles. Collision and comprehensive insurance cover these damages.
  • Engine repairs
  • Third-party liability costs (damages and injuries to other drivers)

How Does Gap Coverage Work?

If your car is totaled, the insurance company will pay you a settlement based on your vehicle's Actual Cash Value (ACV). You won’t receive the actual cash value (ACV) that you paid for the car. Your insurer will also subtract the deductible that you owe from your policy.

An insurer will determine the actual cash value of the vehicle (ACV) by determining the condition of your car before the car occurred. They will also research the market value of similar used automobiles in your local area. The ACV is different from your vehicle's book value. It may not reflect its current market price. Tell your claims adjuster if you had any major work done to your vehicle. These jobs include getting your transmission or engine replaced. The insurance company will send an appraiser. They will evaluate the ACV of your car. They will decide separately how much your vehicle is worth. After they establish the value of your car, you’ll receive a settlement. The insurer will make the check out to your lender if you still owe money on your vehicle. If the insurance settlement is less than what you owe, you’ll have to pay your lender the difference out-of-pocket. When you have GAP coverage, this insurance will pay the difference between your insurance settlement and the remaining amount on your loan.

Here is how Gap insurance may work in a real-world scenario: Nathan purchases a brand-new truck from a dealership for $30,000. A year later, a tanker sideswipes his automobile while he’s driving on the highway. His vehicle has extensive damages, but he’s okay. Unfortunately, Nathan still owes more than $25,000 on his truck. His insurer sends Madeline, an insurance adjuster, to examine Nathan’s truck and determine its value. She declares his vehicle a total loss because the cost to repair it would exceed its value. She offers him a settlement of $20,000, which is $5,000 less than he owes to his lender. If Nathan didn’t have GAP coverage, he would owe $5,000, which he would have to pay out of his pocket to satisfy the loan.

Is Gap Insurance Worth the Money?

According to the Insurance Information Institute, there are several situations where you should consider purchasing GAP insurance for your new vehicle.

  • You made a down payment of less than 20 percent on your car. When you’ve made a down payment, it narrows the gap between what you owe and the car’s depreciated value.
  • You’re financing a car loan for more than 60 months. Longer loan terms guarantee that a car buyer will have negative equity, which creates the need for Gap insurance. Most car loans have a 72-month term. It means the longer you have to pay off a loan, the longer it will take for the loan payments to match the car’s depreciating value.
  • You’ve leased your vehicle. Leases have lower monthly payments than loans because they have a lower principal every month. Most leases automatically include gap coverage.
  • You’ve bought a luxury vehicle that depreciates faster than average. Some cars will lose value more quickly than other ones. You can check with sources, like Kelley Blue Book or Edmunds, to look up the expected depreciation of different vehicles.
  • You’ve rolled negative equity from an older model car into the new loan.

Do you currently have Gap coverage? When you renew your insurance, you can speak with a licensed agent to see if you still need this insurance. You can also shop for a better insurance rate using SmartFinancial. We can pair you with a company, either large or small, that offers low rates for Gap coverage. All you have to do is get an auto insurance quote and tell them you want one that includes Gap coverage. To begin, enter your zip code and answer a few questions.

Who Can Buy Gap Insurance?

You can purchase a Gap policy within three years of buying or leasing a new car. Most insurance or financing companies ask applicants to meet the following requirements:

You must be the original owner of your vehicle.

Your vehicle should be less than three years old.

Once your automobile car is older than three years old, your insurer may ask you to drop this coverage.

How Much Does GAP Insurance Cost?

Gap insurance is an attractive option for people who sign up for a lease or loan for a new vehicle. Some lenders require new car owners to sign up for this coverage. When shopping for coverage, you should consider how much value you'll get for the price. The cost for this coverage varies depending on the provider. For instance, it’s more expensive to purchase Gap insurance from banks, financing companies, and dealerships. According to United Policyholders, you can expect to pay $500 to $700 lump sum for GAP insurance. The National Consumer Law Center said that dealerships marked up the price of GAP coverage by 30 percent. This is why it’s important to shop rates to find a policy that’s more affordable. They add this coverage to your auto loan, which means you’ll have to pay interest on it. Have you already signed up for GAP insurance through a dealership? If you’re not sure, you can check your declarations to see if you carry this coverage. You can still cancel this policy and buy Gap coverage elsewhere to save money. Remember to ask for a refund for any unused premiums. Car insurance companies provide better deals for Gap coverage. They typically charge less than a dealership. On standard insurance policies, insurers add it to the regular premium. This coverage costs an additional $5 to $60 a year more on a standard auto insurance policy. It’s often cheaper to get Gap coverage and auto insurance from the same insurer.

Where Can I Purchase Gap Insurance?

There are several ways you can purchase a Gap insurance policy. You can purchase it as

  • An add-on option in your loan payments from a dealership or lender. (This option is expensive, since you’re also paying interest on the price of your Gap coverage).
  • Optional coverage from an auto insurance company
  • A stand-alone policy from as third-party provider (like Gap Direct) that offers gap coverage as a one-time, upfront fee. While this option costs more than buying from an agent, it’s less expensive than buying it from a dealership.

Note: if you already have car insurance through a standard insurance provider, you cannot purchase an optional, stand alone coverage from another insurance company.

For instance, if you already have auto insurance through GEICO, you cannot get optional GAP coverage through another standard provider like Progressive, Nationwide, or Travelers.

Can I Buy My Own Gap Insurance?

Yes, you can. You can purchase a Gap coverage from a reputable insurance company or a stand-alone insurer that provides Gap coverage.

Do I Need Gap Insurance if I Have Full Coverage?

Full coverage policies cover liability for third parties. It also includes comprehensive and collision coverages depending on what your state requires. Some areas require these policies to carry uninsured motorist and medical coverage like personal injury protection (PIP) and medical payments (MedPay). Full coverage only pays for third-party damages and injuries. It also pays for damages to your car. If your vehicle is totaled, the insurance settlement you receive may not cover the entire amount you owe to a lender. In this situation, Gap insurance steps in and pays off the difference. Although it’s optional coverage, it’s highly beneficial for new car owners. You can buy it as an option on your full coverage policy.

Can You Get Gap Insurance After You Buy a Car?

Under some circumstances, insurers allow you to purchase Gap insurance after the time you've bought a new car. It depends on the make and model year of your automobile. These policies are not only sold by car dealerships. Some insurance companies also offer Gap insurance policies under their coverage. These policies are less expensive than buying them from a dealership. Some insurers will only sell you Gap insurance policies to individuals with brand new cars. To get this coverage, you must:

  • Be the original owner of the car
  • Have the original lead or loan of an automobile
  • Own a vehicle that is no older than two or three model years

Your insurer may have other qualifications you must satisfy before you receive coverage. Speak with the insurance company to find out more information.

How Can I Select the Right Gap Insurance Policy For Me?

There are several things you should consider when shopping for Gap insurance.

Is this a reputable insurance company– When buying a stand-alone policy from a company, check their ratings through the Better Business Bureau (BBB). You can also read online reviews from current and former customers to learn if it honors its contracts.

Will your insurer cover the deductible that you owe – Most policies have a $500 to $1000 deductible on their policy. Sometimes an insurance company will cover the amount you owe; most will not.

Can you cancel your policy – Ask your insurer about their cancellation and refund policy before signing an agreement. Drivers should only keep this policy until they owe less than their vehicle’s ACV.

How much does It .cost? You can ask an insurer for a quote. You can also receive quotes from multiple insurers using SmartFinancial’s online tool.

Two Alternatives to Gap Insurance

Although Gap policies provide enormous benefits, there are alternative insurance that you can use to protect your vehicle if it is stolen or totaled in an accident.

1. Loan/Lease Payoff

Some insurers and financing companies use loan/lease payoff and Gap insurance as interchangeable terms, but there are a few differences. Another term for loan/lease payoff is residual debt endorsement. You can only purchase Gap insurance when you buy or lease a new vehicle. Loan/Lease payoff is available for older and used cars. This coverage usually pays 25 percent of your car’s value instead of the debt you owe. Check the terms of your policy to find out what it covers. Companies that offer loan/lease payoff include:

  • Esurance
  • Farmers
  • Progressive
  • Travelers

Currently, more insurance companies offer gap insurance versus new lease/loan payoff.

2. New Car Replacement

You can sign up for New Car Replacement if you need coverage that helps you get a new vehicle rather than pay off the old one. This coverage will help you buy a new car of the same make and model, minus the deductible you owe, to replace your vehicle. Unfortunately, GEICO doesn’t offer this coverage. Insurance companies that offer new car replacement include:

  • Allstate
  • Farmers
  • Liberty Mutual
  • Safeco
  • Shelter Insurance
  • Travelers

Alternatives from Insurance Companies

State Farm's Payoff Protector

State Farm Bank includes a Payoff Protector with every vehicle loan it provides. It will pay off your car if it is stolen or totaled in an accident, and the insurance settlement amount doesn't cover the outstanding principal balance due.

USAA Total Loss Protection

Individuals who get a car loan through USAA have the option to buy their Total Loss Protection Plan. It functions similar to Gap insurance. It will cover the gap between what you owe and your car's actual cash value (ACV) up to $50,000. It includes $1,000 of your deductible.

USAA Car Replacement Assistance

This coverage is similar to GAP insurance, and is available if you bought a car or have an auto loan through USAA or another lender. This coverage can help you to purchase a new vehicle in case your car is totaled, not just pay off the car loan. To be a USAA member, you must be a military family. Are you a GEICO customer who needs a third-party option for Gap insurance, New Car Replacement, or Loan/Lease Payment? You can search for a provider using SmartFinancial. We’ll provide you with a list of quotes from providers who can offer you GAP coverage at an affordable price. We’re the intelligent way to find insurance.

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