If you’re financing a car purchase, Kentucky has a lot to offer in the way of gap insurance. It can also help to prevent financial distress, as many types of insurance. It does not offer financial protection to people who have a more recent, well-financed vehicle. The best Kentucky car insurance companies will likely offer gap insurance at a cost that is different from what you would pay elsewhere.
What is gap insurance?
Gap insurance can be an optional coverage that you can buy to cover the difference between the car’s current value and the remaining loan amount in the event of a total loss.
All cars depreciate over time. However, this is more noticeable with newer or older cars. These cars depreciate most when they leave the lot. Your insurance company will not pay you the amount you paid for your car if it is stolen or totaled. Your insurer may not pay enough to cover the loan if your car is totaled or stolen. In these cases, your insurer may offer gap coverage to help you avoid being left with an unpaid loan balance if the vehicle is beyond repair.
What does Kentucky’s gap insurance look like?
Kentucky gap insurance may be something you are considering if you have a car loan. Gap insurance is not available for every car that has been financed in Kentucky. You must have the following requirements to be eligible for Kentucky gap insurance:
- You must be less than 2 years old
- Both collision and comprehensive coverage are available
- Have not had any other loans/leaseholders
Gap insurance must also be purchased at the same moment as the car. You can save money by working with an insurance company and purchasing gap insurance before you sign the loan agreement.
It is common to believe that a car with a loan is required in order to purchase gap insurance. This is incorrect in Kentucky and often in other states.
Another misconception about gap insurance, is that it is the same as “new car replacement”. After the actual cash value of the insurance policy has been calculated, gap coverage will not pay the balance on a car loan. You will not receive financial compensation for purchasing a car. However, if your other loan has been paid off, it may be easier to obtain a car loan.
What are the best times to use gap insurance?
In cases where your vehicle is beyond repair, and your insurance company determines that it is a total loss, you can get gap insurance. The car must have more damage than its actual market value to be considered a total loss. A cracked windshield or damaged bumper will not be sufficient to activate gap coverage. Gap insurance is available if the vehicle’s actual cash value exceeds the loan amount.
Take the following example as an example:
One of the trees that falls on your car is a result of a storm in your area. Your insurance company will pay for damages if you have comprehensive coverage. An agent arrives and determines that your vehicle is a total loss. After taking into account the deductible, depreciation and other factors, your insurance company will pay you $20,000. This leaves about $7,000 owing to your lender. In this case, gap insurance would cover $7,000 of the $20,000 remaining.
Gap insurance vs. other coverages
There are many types of car insurance that can provide financial protection. In this sense, gap coverage is very similar. One key difference between Kentucky gap and other types of insurance is that you need to have collision and comprehensive in order to be eligible to buy it. It protects you against total loss. To be considered a total Loss, it must include damage or loss that is covered by either comprehensive or collision.
Gap insurance is only available if the payout difference between your actual cash value and the outstanding loan balance is greater than the gap. Gap insurance is not available if your loan has been paid down to the point where there is no difference in value.
Here’s how gap insurance compares to comprehensive and collision coverage.
Kentucky: Where can I buy gap insurance?
Gap insurance can be purchased through multiple dealers at the time of purchase. However, there is one important thing to remember: The dealership will likely add additional costs to your loan. This will result in you paying interest on both the loan and gap insurance. Another disadvantage to buying gap insurance through a dealer is that dealers may charge you more for gap insurance than regular insurance companies, even without interest.
A gap insurance policy through an insurance company can save you more money overall. You may need to inquire about gap insurance availability from different Kentucky car insurance companies. Insurance companies may call gap insurance “loan or leasing coverage” instead of gap coverage. This is not unusual.
Kentucky has several gap insurance companies
All the listed insurance companies are also available as Kentucky gap insurance providers:
- Travelers – Travelers offers many insurance products including gap coverage. You can also use Travelers to insure your car and your home.
- Nationwide — This insurance option is available regardless of whether you have an auto insurance policy. This is great for drivers who only need short-term gap insurance.
- Progressive – Progressive offers many coverage options, including gap coverage. One car insurance company calls gap coverage “loan/lease coverage.”
- Allstate — Allstate offers gap coverage, as well as many other types of coverage. You can also get discounts on your car insurance policy, which could help you save even more.
- Liberty Mutual — Liberty Mutual offers gap coverage, as well as all other types of coverage. This insurance must be purchased with your car purchase.
Questions frequently asked
What is the cost of gap insurance?
Gap insurance costs vary depending on the car purchased and who you are. The cost of gap insurance in Kentucky can vary depending on the location.
Kentucky requires gap insurance
Kentucky state law does not require gap insurance. You must opt for gap insurance when you buy the vehicle. It also requires comprehensive and collision coverages (also required to most vehicle financiers).
Is gap insurance required to be purchased through the same company that your car insurance?
No. No. You don’t have to purchase gap insurance through the same company that you buy car insurance from. However, this may be the easiest and most cost-effective option. Kentucky requires you to have comprehensive and collision coverages.