In Massachusetts, comprehensive and collision car insurance policies (Full Coverage) will pay for the replacement of your vehicle if it’s a covered total loss – up to the limits of your policy based on the car’s actual cash value. This value is calculated as the cost of the car when it was new, minus depreciation for age, mileage, physical condition, and other factors. This is why you want to have gap insurance in Massachusetts.
After just a year, the ACV of your car can be thousands less than what you paid for it, which can leave you with an expensive loan or lease balance. This is why you never want to purchase a newer vehicle without putting at least 20% down. Refer to our section on how to buy a car the right way.
GAP Car Insurance Definition
GAP insurance covers the difference between the ACV of your vehicle and the remaining loan balance. The coverage is usually more expensive than gap insurance purchased directly from a dealership. But there are many ways to save money on gap insurance in Massachusetts. Read our gap insurance guide to the subject and find the best policy for you. If you’re unsure which company is right for you, try an online comparison site.
GAP insurance is not a mandatory requirement for Massachusetts drivers. You can add it to your auto insurance policy at any time. It will not cover your vehicle’s repair costs. Adding it to your auto insurance policy will cost you between $25 and $50 per year. However, if you’re buying a new car, you may get a lease that requires you to purchase GAP insurance.
What Does GAP Stand For?
GAP insurance stands for “guaranteed asset protection.” It is sometimes called the “loan or lease gap solution”. This optional coverage can be added to help drivers bridge the gap between their car’s actual cash worth (ACV) and the amount they owe on it.
You are involved in an accident, but you are not found to be at fault. Your car is now totaled. Your auto loan balance is still $13,000 at the time of the accident. However, your ACV for the car is only $10,000. Gap insurance (less your deductible) would cover the $3,000 difference.
Contrary to popular belief gap insurance coverage does NOT mean your insurance provider will pay you the entire amount you paid for your car. Gap insurance may allow your insurance provider to pay you the amount that you owe, after paying your deductible. Gap insurance is a smart addition to your collision policy, depending on your situation.
Gap insurance: When should you consider it?
There are some things to consider when deciding if gap insurance is necessary. For the following drivers, gap insurance can be a great option:
- Drivers who owe more than their car’s value on a car loan. You should calculate your current car loan payment and compare it to the car’s actual cash value. This is not the same amount as the price you paid for your car. Do you have a gap? You should strongly consider buying gap insurance if you have one.
- Gap insurance is required for drivers whose car loan has a maximum amount. No matter how much you owe on your car loan, some loan providers require gap coverage from the beginning of your loan.
- Drivers who have a lease that requires gap insurance. Gap insurance is a protection measure that many auto leases require. Some leasing companies may include gap insurance as part of their lease price.
Drivers who are the sole owners of their vehicle and drivers who owe less than their current cash value (as long as there is no “gap”) in value do not require gap insurance. However, they will still need to have car insurance to protect their car from the unexpected.
What is the cost of gap insurance in Massachusetts?
You may be wondering how much gap coverage will cost to your auto insurance premium if you have it. Gap insurance is not as costly as comprehensive or liability insurance. However, costs can vary depending on many factors.
- Current actual cash value (ACV), of your vehicle
- Your age
- Your state
- Previous car insurance claims
- You will not need gap insurance if you “close the gaps” and owe less on your car than its ACV.
Is it worth buying gap insurance?
Perhaps you are still asking yourself, “Is gap insurance worth it?” If the circumstances are right, it could be. In the event that your vehicle is totaled or stolen, gap insurance will be in effect. Even though you may be responsible and cautious, others on the road are not. If you have a car loan that is “upside-down”, you may not be covered by gap insurance. You could lose thousands of dollars. Do you want to gamble on the gap insurance? Get a free quote to find out if gap insurance is the right fit for you.
Gap Insurance for MA Auto Loans
You may have two very different values for your vehicle: the market value and the amount you owe on the vehicle loan. If you buy a vehicle new, the value of that vehicle will drop dramatically when you drive it off the lot. Based on mileage and wear and tear, the same applies to the first few months and years of ownership. The market value of your vehicle is used often to determine your coverage when you buy auto insurance. There can be a gap between what your car is worth and the amount you owe. This problem can be solved by gap insurance for MA auto loans.
What is Gap Insurance for MA Auto Loans and How Does It Work?
Gap insurance does not replace regular car insurance but is an addition to an existing auto insurance policy. It pays the difference between the amount you owe on your car loan and the actual cash value of your car. This insurance is essential in cases where your car is stolen, or if you are involved in an accident that results in total loss. If your auto loan is not covered by your insurance, gap insurance will cover the difference. You don’t need gap insurance if you bought your car with cash, or with a substantial down payment.
Gap insurance coverage
Gap insurance can be purchased as part of your auto loan financing. The cost of the first option is usually higher because finance companies aren’t regulated by the state about what they can charge, while insurance companies are. To avoid paying twice for gap insurance, make sure you check if it is included in your financing. There may be limitations and exclusions that apply. For more information about gap insurance for MA auto loans, including exclusions and costs, contact our local insurance agency.
Get a FREE Quote in Under 5 Minutes
Get a free quote to find out how much gap insurance will cost for your specific needs. It is always important to be fully protected with the right type of coverage. REMEMBER: gap Insurance in MA may be a good idea if you have a car loan. If the value of your car drops below the amount you owe on the loan, gap insurance will cover the difference. Get in touch with our local agents for more information about how this type of coverage can help protect you.
What Does it Cover?
Gap insurance only covers damage to your vehicle, not other property or bodily injuries resulting from an accident. Here are a few common questions related to gap insurance coverage.
Does it Cover Stolen Vehicles?
If you have the right coverage gap insurance would kick in if your vehicle is stolen and recovered yet damaged beyond repair or if it is not recovered.
Does it Cover Your Deductible?
No. If you have an accident covered by your gap policy, you would still have to pay your deductible. In other words, if the “gap” reimbursement amount is $2,000 and your deductible is $500, your total reimbursement amount would be $1,500. Check out our article on how deductibles work.
Does it Cover Mechanical Breakdown?
No. This coverage is only used in the event of a total loss from a covered accident, not for mechanical repairs.
Does Gap Insurance Cover Death?
No, it is only applicable to vehicle losses and does not cover bodily injuries, medical expenses, lost wages or funeral costs.
Does it Cover an Upside Down Loan?
Yes. An “upside-down loan” is another way of describing the gap between what you owe on your auto loan and the car’s actual value. Again, this is why you need to put down at least 20% on your vehicle purchase – this would immediately eliminate being upside down on your loan vs. what the car is worth.
After being in auto insurance for over 25 years I have unfortunately seen this play out countless times. People suffer a total loss on their vehicle and then owe more to the bank than they get from the insurance company payout.
This is why we recommend that if you are buying a vehicle less than 5 years old you put money down on the purchase and you contact us to get your Gap Insurance quote – we have great prices! 413-543-3800