Gap Insurance in Arizona | The bank rate


You may have heard about gap insurance for the first time from a friend, car dealership, or insurer. It is well known that as soon as you drive a new car away from a dealership, its value depreciates dramatically and then continues to depreciate over time. The best auto insurance companies can explain up front when you request a policy quote whether gap insurance can protect you financially in the event of your vehicle’s total loss. Understanding how gap insurance works, what it’s used for, and how it can provide additional financial protection can help you decide if it might be for you.

What is gap insurance?

Gap insurance coverage is designed to bridge the “gap” between your insurance payment for a total loss and your outstanding loan balance. While your all perils or collision coverage provides for the payment of the actual cash value of your vehicle when it is recorded as a total loss (due to various causes, such as a serious accident, natural disaster, fire or theft of your vehicle). ‘a vehicle) which can sometimes be insufficient to repay the outstanding balance of your car loan.

In Arizona, gap insurance will close that gap when you find yourself “upside down” with your loan. This can happen with any car loan, but most often happens with newer or specific makes and models of vehicles that depreciate quickly.

How Does Gap Insurance Work in Arizona?

Gap insurance is meant to address very specific situations where you end up with more debt on your car than what you receive in a car insurance payment. In Arizona, gap coverage is generally only available when you purchase a brand new car, no more than a model year in most cases.

Gap is not an add-on that covers a variety of losses, such as the cost of leasing a vehicle while repairs are in progress or you are waiting for a replacement vehicle. Gap also does not cover costs related to a loss such as medical costs, repair costs or civil liability claims.

When do you use gap insurance?

Variance insurance only applies in situations where there has been a total loss of a vehicle. The most common cause is a serious single or multiple car accident which totals your vehicle. However, the loss can also be caused by other covered risks, such as theft without recovery. The amount of your gap coverage will depend on the actual cash value of your car at the time of loss and the amount of an outstanding loan on that vehicle.

For example, suppose you bought your new vehicle for $ 25,000 and since the purchase the car has depreciated and is currently valued at $ 17,000. You have funded the purchase and currently owe $ 20,000. If you are in an accident and your car breaks down, you are still required to repay the loan, but the insurance proceeds (minus your deductible) will leave you with $ 3,000, which you will have to pay out of pocket. unless you have a coverage gap.

Gap insurance vs other coverages

Typically, a person who wants the strongest coverage for a vehicle will buy a policy with three basic coverages: Third Party Liability, Collision, and Full Coverage. Each coverage protects you (or others) against a specific type of damage or injury, in the event of an accident or other form of covered loss. Variance insurance is separate from these coverages and is generally not automatically included in a standard auto insurance policy.

Gap insurance Full Collision
What it covers The difference between an outstanding loan on a vehicle and the insurance proceeds paid on a total loss. This covers repairs or replacement when the insured vehicle is damaged by a hazard other than an accident. The cost of repairing or replacing a vehicle caused by an automobile accident.
Who offers it In Arizona, gap insurance can be purchased from your insurance company or the car dealership / lender that funded a loan for the vehicle. Full coverage is optional, but a smart addition to add to your policy with your auto insurer. Collision coverage is an integral part of your auto insurance policy offered by your insurer.

Where to Buy Gap Insurance in Arizona?

The best car insurance companies in Arizona generally offer insurance against gaps, and often at affordable prices. Dealerships and lenders (like credit unions) also often offer gap coverage in conjunction with a car loan, but you may find that the cost is higher than that charged by insurers. If the premium is included in the loan, you will likely pay additional interest as well. However, this may be preferable for drivers who find it more convenient to combine gap insurance with their loan.

Gap Insurance Companies in Arizona

Here are some of the biggest auto insurance companies and others that can sell you Gaps coverage in Arizona:

  • Allstate – Allstate provides gap coverage protect new vehicles as well as certain newer used vehicles in good condition. Loan amounts up to $ 50,000 may be covered by Allstate Arizona spread insurance.
  • State farm – State Farm’s response to gap coverage is “Protector of earnings. “This coverage protects against the same risk as gap coverage, in that a total loss payment will be less than a loan balance. Payoff Protector is only available on otherwise insured vehicles that are funded by the State Farm Bank.
  • The Hartford – Hartford offers gap insurance optional to add to its standard auto insurance policies. According to the Hartford, this coverage pays “the difference between the actual cash value of your car and the amount you owe on the loan, if it is stolen or totaled.”
  • At national scale – Nationwide offers gap insurance with the limitation that a policyholder remains liable following a loss to pay the policy deductible. This is important to know when determining the value of the deductible you want to include in your auto insurance policy.
  • Arizona Federal Credit Union – The “Secured Assets Protection” plan of this credit union pays the difference between what your auto insurance company pays and what you have to pay for your car loan, pays your deductible and grants a loan for a vehicle of substitution.

Frequently Asked Questions

How much does gap insurance cost?

In Arizona, auto insurance companies, dealerships and finance companies sell gap insurance. Check with your auto insurance company first to understand the options and see if the rates are more competitive to add to an existing policy rather than buying separately.

Is Gap Insurance Required in Arizona?

No, you are not required to have gap insurance in Arizona. The law only requires that certain minimum limits be in place to protect other people who are injured or sustain property damage as a result of your driving. However, due to the potential financial risk, it can be a useful hedge to provide additional financial protection.

Can I cancel my gap insurance coverage?

Yes, gap coverage can always be canceled. The question you need to ask yourself when considering this is how much risk you will be taking without it. Plus, you can usually receive a pro-rated refund for amounts already paid, but make sure before you cancel.


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