Auto insurers in Colorado offer Gap insurance (“guaranteed assets protectIon”) coverage. Gap insurance is a type of coverage that pays the difference between the outstanding car loan and the amount of insurance proceeds after the vehicle’s total loss. This “gap” is for drivers who are concerned about financial risks when driving a new vehicle.
What is gap insurance?
Gap Insurance provides financial compensation for car owners who have lost their vehicle. A vehicle can be destroyed by fire, accident, or other natural disaster. Gap insurance in Colorado can help you make up any difference if your car loan is more than what the auto insurer pays.
What is the Colorado equivalent of gap insurance?
Gap coverage is not included in standard car insurance policies so it may not be something you consider when buying a car. Gap coverage can be a cost-effective way to ensure you don’t lose too much in case your vehicle is destroyed beyond repair. Before you decide if gap coverage is right for you, it is important to understand the basics of how it works.
Gap insurance in Colorado, unlike the standard components of a policy like liability, comprehensive, or collision coverage is intended to cover a narrow portion of risk. Gap insurance does not usually apply to older cars due to its narrow scope. Gap coverage is not a one-size-fits-all policy. There are many add-ons such as rental reimbursement, towing, and lost items.
In the event of total loss, Gap covers only the difference between the insurance payout amount and the outstanding loan balance. Gap doesn’t affect the process for getting a replacement vehicle in the event of a total loss.
What are the best times to use gap insurance?
Only if your vehicle has suffered a total loss, will gap insurance be applicable. This is usually associated with a serious accident. However, other perils can cause damage. The policy does not distinguish between the cause and the extent of the loss.
If your car is damaged in a storm and your insurer pays $10,000, it would still put you in financial trouble even if the loan was $15,000 more. In this case, the gap coverage would pay $5,000 to the lender to repay the loan.
Gap insurance vs. other coverages
The three main components of a standard car insurance policy are liability, collision, and comprehensive. These coverages provide financial protection against third-party claims, injury to you and your passengers, and damage to your car or its contents. In that it can help you if your vehicle is damaged, gap insurance is similar to collision and comprehensive coverage. The similarities do not end there.
Colorado: Where can I buy gap insurance?
The best Colorado insurance companies can provide you with gap insurance. These companies offer gap insurance as a standard option because car buyers finance their purchases.
While it may be more costly, you can still purchase gap coverage directly from the dealer or lender who funded the purchase. It is common for the coverage to be purchased through a lender or dealer. This means that you might end up having to pay it off as part your loan payment.
Colorado has several gap insurance companies
Colorado insurance companies offer optional gap insurance coverage that can be added to car insurance policies. These dealers and carriers offer gap coverage in Colorado:
- Allstate Allstate provides broad gap coverage that protects both new and used vehicles. It also covers loans up to $50,000. You will also be reimbursed for any deductibles less than $1,000.
- Liberty Mutual– Liberty Mutual requires that coverage be purchased at the time the vehicle is bought. This insurance company provides only gap coverage for new car buyers.
- Nationwide Nationwide offers gap insurance, but requires that the insured pay the deductible.
- Credit Union of Colorado: If your vehicle is stolen, totaled or damaged in any way, the credit union’s Guaranteed Asset Protection pays the difference between the car insurance’s payment and outstanding loan balance.
- Automotive Search Inc. This car dealership offers gap protection for vehicles up to $100,000.
Questions frequently asked
What is the cost of gap insurance?
You can purchase gap insurance from one of three sources: a car insurance company or lender, or a dealer. Gap coverage will usually be more expensive if it is purchased through a dealer or lender. If you want to get the best rates, it is a good idea to compare these costs to a quote from your auto insurance company for gap coverage.
Colorado requires gap insurance
Colorado does not require that you purchase gap insurance. Dealers and lenders might require gap coverage to be purchased in order to finance the sale. Some drivers might consider gap coverage necessary because of the high financial risk involved.
Can I cancel my insurance coverage for gap?
A prorated refund is usually possible to cancel a gap coverage policy. You should cancel a gap coverage policy by ensuring that any outstanding loan balance is reduced to a level below the actual cash value of your vehicle. For more information about cancellation, contact your gap insurance provider.