If you are a Pennsylvania driver with a car loan or leased car, gap insurance is a good thing to understand. Pennsylvania gap insurance can provide drivers in this state more financial protection following the theft or totaling of your car than if you only have collision and comprehensive coverage. Many of the best car insurance companies offer gap insurance.
What is gap insurance?
Simply put, General Asset Protection — or “Gap” — insurance pays the difference between what you owe on your car and the car’s actual cash value (ACV) if the car is destroyed or stolen. With new vehicles, your car may depreciate faster than you are able to pay down the loan, and without gap coverage, you might be out thousands of dollars following a serious accident.
How does gap insurance work in Pennsylvania?
So how does gap insurance work in Pennsylvania? There are a few important points to note. First, it is only available for cars that are either new or up to a year old. If you have an older car, even if you owe more than the car is worth, you might not be able to purchase gap insurance in Pennsylvania.
Second, gap coverage is not the same thing as new car replacement insurance. The latter type gives you the money necessary to buy a new car of the same model as the car you have lost. Gap insurance has nothing to do with an actual replacement vehicle; it only applies to the amount you owe on your current car loan.
When do you use gap insurance?
Gap insurance only comes into play if your car is determined to be a total loss after an accident, or if it is stolen and not recovered. In these cases, you would apply to access your gap insurance when you make a claim.
For example, say your 2020 Honda Civic is totaled in a crash. The car’s actual cash value is $20K, but you made a small down payment when you bought it and it still owe $24K on the car, factoring in interest. With regular collision insurance, your insurer would fulfill your claim with a check for $20K (or up to policy limits), minus your deductible. If you have gap insurance, the additional amount required to satisfy the outstanding loan would be provided to the lender.
Gap insurance vs other coverages
Buying gap insurance can be a good idea for drivers who prefer that level of financial protection, but it helps to know when it is most useful. For context, consider gap insurance compared to the different types of car insurance coverages that are commonly included in a standard policy. Gap insurance is similar to some other types of coverage, but with a few key distinctions.
|What it covers||When a car is totaled or stolen, it covers the difference between the car’s ACV and the amount owed.||Covers ACV (minus deductible) when a car is totaled or damaged in a non-accident-related mishap.||Covers ACV when a car is totaled or damaged in an accident.|
|Who offers it||Some insurers offer it; it may also be available from your car dealer or wherever you obtained your loan.||Available at almost all auto insurance companies.||Available at almost all auto insurance companies.|
Where to buy gap insurance in Pennsylvania?
Looking into where to buy gap insurance in Pennsylvania, you may need to go no further than your car dealership — especially if you financed your vehicle with the dealership. Often they will be able to write you a gap insurance policy, although this may not be your cheapest option.
There are also gap insurance companies that can write you a policy, or you could potentially go directly to the company that holds your primary auto insurance policy. This may be your most cost-effective option, but obtaining quotes is the best way to determine for sure.
Gap insurance companies in Pennsylvania
Your first step when looking for gap insurance in Pennsylvania is finding a company that offers it. The following insurers and others have gap insurance available for those with new cars who want to be protected in the event of an accident or theft.
- Plymouth Rock Assurance: this regional insurer (it sells policies in just six states, including Pennsylvania) offers gap insurance in addition to auto insurance.
- Yoder Insurance: Yoder is a regional insurer that sells policies only in Pennsylvania. Although it is a smaller insurer, it also offers gap insurance.
- Nationwide: Nationwide is a large national insurer of cars, homes and other assets. Gap insurance is an optional coverage offered by this provider, as well.
- State Farm: State Farm sells more auto insurance than any other company in America, and its version of gap insurance is called Payoff Protector. Anyone who receives a car loan from a State Farm bank (an alliance with US Bank) may purchase this, even if their car insurance is with another company.
- USAA: If you or a member of your immediate family is in the military or is a veteran, you are eligible to buy insurance from USAA. The company offers a product they call Total Loss Protection for cars that are less than seven years old and which have a car loan for more than $5.000, which reimburses up to $1,000 of your deductible.
Frequently asked questions
How much is gap insurance?
Gap insurance costs will be related to the type of car you buy and other factors. If you purchase it as part of your car insurance policy, it may work out to as little as $50-$100 a year. Gap insurance purchased from a car dealership will be more in most cases.
Is gap insurance required in Pennsylvania?
No, you are not legally obligated to buy gap insurance in Pennsylvania. The state does have laws concerning the type and amount of car insurance you need, but gap insurance is not mandatory and is only available for you if you have a newer car.
What is standalone gap insurance?
There are two ways you can purchase gap insurance in Pennsylvania: either as part of your auto insurance policy, or in a standalone policy that is not connected to your standard car insurance. Standalone policies may be available from gap insurance providers, including dealerships or independent finance companies.
How do you cancel gap insurance?
To cancel gap insurance, you will typically need to notify the holder of your policy, whether that’s the dealership, a finance company or your car insurance company. It may be best not to cancel your gap insurance until you have paid down enough of the loan that it is worth less than the car’s actual cash value.