Gap Insurance Massachusetts | The bank rate

You’ve probably heard that as soon as you drive a new car, it’s immediately worth less than what you might have paid for. This is a very simplified way of explaining a concept known as “vehicle depreciation”. If you were financing a new vehicle, you could run the risk of having a loan that exceeds the depreciated value of the vehicle. While this in and of itself is not a dilemma for Massachusetts drivers who prefer to own a new vehicle, it has more serious implications in the event of a costly accident.

If you are responsible for an accident that totals your new car, you will still owe your car payment to the lender, even if your auto insurance payment does not cover the full replacement cost of the new vehicle. Gap insurance in Massachusetts is designed to protect you financially in this scenario. It is available for purchase from many of the best auto insurance companies.

What is gap insurance?

Gap insurance is also known as loan or lease gap coverage, and is an abbreviation for general asset protection. Gap insurance, as the name suggests, covers the “gap” between the amount of money your insurance company pays you, if your vehicle is stolen or declared loss, and the remaining balance of what you owe to a lender. Gap insurance in Massachusetts is additional coverage – it is not required but you have the option to add it.

How Does Gap Insurance Work in Massachusetts?

To understand how gap insurance works in Massachusetts, it’s important to address a few underlying clarifications. Massachusetts Gap Insurance does not apply to any vehicle that you have financed for more than it is worth; it only applies to new vehicles – or those that are no older than a year.

Second, gap insurance is not new car replacement insurance. This can help you pay off a loan on a new car, but it does not provide the full funds to replace the vehicle with a new version. The amount covered by the gap insurance is sent directly to the lessor or lender.

To understand how gap insurance works, consider the following scenario. Suppose you just bought a new Ford SUV for $ 45,000. You have chosen to finance the vehicle by repaying the loan over five years. After six months, the value of your Ford goes down and is now worth $ 36,000. However, you still owe around $ 42,000 on the loan.

If you caused an accident and your car was declared a total loss, your insurer may only pay you the current value of $ 36,000. However, the lender still owes the total balance of $ 42,000. If you did not have gap insurance in your policy, you will have to pay the difference of $ 6,000 out of pocket. On the flip side, let’s assume you’ve purchased gap coverage. The auto insurance company pays the difference of $ 6,000 to the lender so that you can walk away from the totaled vehicle with no outstanding loan obligation.

When do you use gap insurance?

Gap insurance is used when your new car or rental vehicle is declared a total loss or gone missing because it was stolen, and is needed to cover the outstanding loan amount not covered by the cost limits. replacement of your policy. It will not cover the expense or damage to have your vehicle repaired. So if you plan to put less than 20% down payment to pay for a new vehicle (the amount a car typically depreciates in the first year) then gap insurance can give you peace of mind. additional.

Gap insurance vs other coverages

Spread insurance is often used in conjunction with other types of coverage. Here is a comparison of how each one works.

Gap insurance Full Collision
What it covers The amount still owed after the insurance company has paid the actual cash value of the vehicle for a new or leased vehicle that has been stolen or declared a total loss Covers loss, damage and repairs due to:
Animal collision
Falling objects
Covers loss, damage and repairs due to an accident or collision with another vehicle or structure
Who offers it Many insurance companies
Finance companies
Car dealers
Most insurance companies Most insurance companies

Where to Buy Gap Insurance in Massachusetts?

Gap insurance is not mandatory in Massachusetts. This is not standard coverage nor included in your basic policy. It is complementary and designed for short-term coverage when purchasing a new vehicle or being leased. It is only needed for the initial period of your loan when you owe more on a loan than the value of the vehicle. Because it is not specialized coverage, gap insurance coverage is generally available from most auto insurance companies.

If your current auto insurance company doesn’t offer gap insurance, you can also purchase coverage from a car dealership or finance company. However, gap insurance may be the cheapest from your auto insurance company when you add it to your current vehicle’s insurance policy.

Gap Insurance Companies in Massachusetts

Most of the major auto insurance companies offer gap coverage in Massachusetts, with a few exceptions, such as Geico. You can purchase variance insurance in Massachusetts from certain carriers and auto dealers:

Frequently Asked Questions

How Much Does Gap Insurance Cost in Massachusetts?

The cost of gap insurance is minimal compared to the amount you might have to pay out of pocket to take out a loan or lease once your vehicle has been totaled. If purchased separately, the cost may be higher than if you are able to add this coverage to your existing policy.

Is gap insurance required in Massachusetts?

Gap insurance is not required in the state of Massachusetts. However, if you are buying or leasing a new vehicle, your lender may require you to purchase gap coverage. If not, it may be worth the small investment of saving up to thousands of dollars in case your car runs out of power when you owe more than it was worth.

How to cancel the gap insurance?

To cancel the gap insurance, you must contact the company with which you purchased it and inform them. You may have purchased coverage from your insurer, lender, or car dealership, and depending on whether or not a term of coverage applies, cancellation requirements may be in place.

Who Needs Gap Insurance?

Variance insurance can be of great benefit to drivers who plan to buy a new car and invest less than 20% to finance it. In this case, it may be necessary to purchase variance insurance to make up the difference if you end up owing more than the value of the car, in the event that it is declared a total loss. Additionally, some leasing companies may require you to purchase gap coverage.

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