Will Gap Insurance Cover a Totaled Car?

You may have heard of gap insurance but are unsure of how it works, especially in situations when a vehicle has been ruled a total loss. After a serious accident, the cost to repair a car may exceed its current value. In such a case, the vehicle may be labeled as "totaled." But while gap insurance can provide reimbursement in certain instances, it doesn't cover them all.

Knowing when and how your gap insurance can provide reimbursement for a totaled vehicle can help you better financially prepare in case of a disaster. A local independent insurance agent can also help you ensure you're covered by the right car insurance ahead of time. But until then, here's a breakdown of whether gap insurance covers a totaled car.

Table of Contents

Will Gap Insurance Cover an Uninsured Car That Gets Totaled?
When and How Does Gap Insurance Cover Your Car?
How Much Does Gap Insurance Cover a Totaled Car?
How Much Do I Have to Pay If My Gap Insurance Doesn’t Fully Cover My Totaled Vehicle?
If Gap Insurance Coverage Doesn’t Cover a Totaled Car with No Insurance, What Will?

Will Gap Insurance Cover an Uninsured Car That Gets Totaled?

If you don't have any coverage for a vehicle before it gets totaled, gap insurance won't provide any reimbursement after the incident. Your car must at least be covered by a basic auto insurance policy in order for gap insurance coverage to apply if it gets totaled. It’s important to purchase insurance responsibly, which means starting with a solid car insurance policy for any vehicle you own.

You'll likely want at least liability insurance for your vehicle, but you may also be required to have additional forms of protection by law in your state. These may include collision insurance, comprehensive insurance, uninsured motorist insurance, and others. An independent insurance agent can help you build a complete car insurance policy that satisfies all local requirements and provides the protection you need for many different scenarios. 

When and How Does Gap Insurance Cover Your Car?

Gap insurance is designed to help you get reimbursed for the full amount still owed on an auto loan if your car is totaled. As soon as you drive your car off the sales lot, it’s already depreciated in value. In the event of a wreck, your insurance company will only pay you for the current cash value of your vehicle. This likely won’t be enough to pay off the remainder of your car loan if it happens a few months after buying the vehicle.

Gap insurance is designed to cover the extra amount, or the “gap," between your car’s depreciated value and the remaining amount still owed on your auto loan. Gap insurance essentially makes everything whole again by covering the portion left over after your standard auto policy pays out for your car’s current cash market value.

After a couple of years have passed, gap insurance becomes useless. By this point, your personal auto policy should cover the full amount remaining on your car loan and beyond.

How Much Does Gap Insurance Cover for a Totaled Car?

If you purchase the right amount of gap insurance, it will cover the remaining value of your auto loan if your car is totaled after your regular auto policy pays. Let’s say you purchase a $40,000 car, then total it a year later. Your car may only be worth $28,000 by this point, but you’ve still got $35,000 left on your loan. Gap insurance can make up that $7,000 difference not covered by your standard auto policy.

When shopping for your gap insurance policy, you’ll need to work closely with your independent insurance agent to get the amount of coverage that’s right for you. The amount of coverage you need will depend on the type of car you buy, how much it’s worth, the length of your loan, whether you’ll be making a down payment, and other factors. Be sure to walk away with a policy that makes sense for you.

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How Much Do I Have to Pay If My Gap Insurance Doesn’t Fully Cover My Totaled Vehicle?

You’ll be responsible for any remaining amount on your car’s loan after your standard auto insurance policy pays for the current value and gap insurance pays up to the limit specified in your policy. If you purchase enough gap insurance, however, you shouldn’t owe anything in the event your car is totaled. That’s the point of getting gap coverage in the first place.

If Gap Insurance Coverage Doesn’t Cover a Totaled Car with No Insurance, What Will?

Nothing. You must have a personal auto policy in place for gap insurance coverage to kick in if your car is totaled. Without a personal auto policy, there would be no “gap” for gap coverage to fill, so it doesn't even make sense. 

Be responsible when purchasing a vehicle and sign up for a standard auto insurance policy, and if you think you’ll need it, you can also purchase gap insurance coverage.

Here's How an Independent Insurance Agent Can Help

A local independent insurance agent can answer all your questions about gap insurance and more. Your agent can shop and compare policies and rates from multiple car insurance companies to find you the best deal and coverage. They can also help you find car insurance discounts and even file car insurance claims for you down the road.