Most people have heard that a new car is worth less the first time it leaves the lot. This simplified explanation of “vehicle deduction” is not the best. If you finance a vehicle, it could be worth less than the vehicle’s depreciated value. This isn’t a problem for Massachusetts drivers, who would rather own a new car. However, it can have more serious consequences in the case of an expensive accident.
You will still owe the lender your car payment if you are at fault in a collision that damages your vehicle. In this situation, Massachusetts Gap Insurance is available to help you financially. It can be purchased from many top car insurance companies.
What is gap insurance?
Gap insurance also known as loan/lease gap coverage and general assets protection. Gap insurance covers the gap between what your lender owes and what your insurance company pays. Gap insurance in Massachusetts can be added to your existing coverage.
What is gap insurance in Massachusetts?
It is important to understand the basics of Massachusetts gap insurance. Massachusetts gap insurance doesn’t apply to any vehicle that you have financed for more money than it is worth. It only applies to new vehicles, or to one-year-old vehicles.
Gap insurance is not a replacement for new car insurance. Gap insurance may be used to pay off a car loan, but it doesn’t provide enough funds to purchase a new vehicle. Gap insurance pays the lender or lessor directly with the amount it covers.
Consider the following scenario to understand how gap insurance works. Imagine that you have just bought a Ford SUV for $45,000. The vehicle was purchased with financing, which will allow you to pay the loan down over five years. Your Ford’s value drops to $36,000 after six months. You still owe approximately $42,000 on the loan.
Your insurance company may pay only the current value of $36,000 if you cause an accident or your car is declared totaled. The lender still owes the $42,000 balance. You would be responsible for the $6,000 difference if you didn’t have gap coverage in your policy. However, let’s say that you purchased gap coverage. The lender pays $6,000 to the car insurance company so that you can get rid of the vehicle. There is no loan obligation.
What are the best times to use gap insurance?
Gap insurance covers your vehicle if it is lost or stolen. It also covers the loan amount that is not covered under your policy. It won’t cover any expenses or damages that your vehicle may sustain. Gap insurance may be a good option if you are planning to put down less than 20% to purchase a vehicle.
Gap insurance vs. other coverages
In many cases, gap insurance can be used with other types of coverage . This is how they work.
Massachusetts: Where can I buy gap insurance?
Massachusetts does not require gap insurance. This coverage is not included in your standard policy. This coverage is optional and can be used to provide short-term coverage for new vehicles or lease periods. If you owe more than the vehicle’s value, it is not necessary. Gap insurance coverage is generally available through most car insurers, even though it is not a special coverage.
You may be able to buy coverage through a dealer or finance company if your car insurance company doesn’t offer gap insurance. Gap insurance can be cheaper through your car insurance company if you add it to your existing vehicle’s insurance policy.
Massachusetts Gap insurance companies
With a few exceptions like Geico, most major car insurance companies offer Massachusetts gap coverage. Gap insurance can be purchased in Massachusetts through select car dealers and carriers:
- AAA
- Allstate
- Arbella
- Nationwide
- Progressive
- Safety Insurance
- USAA
- Auto insurance in Western Mass
Questions frequently asked
What is the cost of Massachusetts gap insurance?
Gap insurance is a relatively inexpensive option compared to the amount you might have to pay out of your pocket to get a loan or lease once your vehicle has been totaled. The cost of gap insurance may be higher if it is purchased separately than if it can be added to an existing policy.
Massachusetts requires gap insurance.
Massachusetts does not require gap insurance. Your lender may require that you have gap coverage if you lease or purchase a vehicle. It may not be necessary, but it could save you thousands of dollars if your car is damaged beyond repair.
How can you cancel your gap insurance?
You will need to notify the company that you bought gap insurance from in order to cancel it. There may have been coverage purchased through your lender, insurance provider or dealer. Cancellation requirements could apply depending on the length of the coverage.
Who has the need for gap insurance?
Drivers who plan to buy a car but have less than 20% down payment to finance it may find that gap insurance is most helpful. Gap insurance may be required in these cases to cover the difference if the car’s value is less than what you owe. Some leasing companies might also require that you purchase gap coverage.
