Gap Insurance in Michigan | The bank rate
If you’re financing or leasing a new vehicle, your dealership or lender may ask you to purchase gap coverage (they may even offer it to you themselves and add it to your final loan amount). However, if you want to save some money, you might want to look elsewhere.
These days, many auto insurers offer gap insurance in Michigan. If you don’t mind researching the best auto insurance companies, purchasing gap insurance in Michigan can be a painless experience that won’t crush your bank account for years to come.
What is gap insurance?
The gap insurance (also called guaranteed asset protection) covers the difference between what you receive from your insurance provider for your vehicle totaled after a covered claim and what you still owe your lender.
All vehicles depreciate. When you receive an insurance payment from your provider, this is the depreciated value of the vehicle, also known as the cash surrender value (ACV). Your auto insurer determines this amount at the time of the loss. If you still have an auto loan balance for your vehicle when it is totaled, you may not receive the full amount from your insurer that is needed to pay off your loan without gap insurance. With gap insurance, you can pay off your loan so that you 1) miss out on two car loans (assuming you are replacing your car) and 2) miss out on paying for something you no longer own.
How Does Gap Insurance Work in Michigan?
Gap insurance is generally an option if:
- You have collision and comprehensive coverage on your vehicle
- The vehicle is not older than 2-3 years
- You are the original lender or lessee of the vehicle
- If you paid less than 20% on your deposit
A misconception about gap insurance is that it is the same as “new replacement car” coverage. The only thing gap insurance does is provide the difference between your ACV payment and the amount you still owe on it. Gap insurance will not pay for you to buy a new vehicle, like a new car replacement does.
When do you use gap insurance?
You can only use variance insurance if your car is considered a total or unrecoverable loss in the event of theft. This means that gap insurance will not cover a simple fender crease or a cracked windshield. As long as the car can be repaired, deviation insurance will not apply.
Your car is stolen and never found. It’s a new car with a loan of $ 30,000. At the time of the theft, your vehicle is worth $ 25,000 due to depreciation. Your auto insurer pays your depreciated value (less your full deductible), which means you still owe the lender $ 5,000. Since you purchased gap coverage, your provider pays the remaining loan balance.
You are in a parking lot and you hit a pole while backing up. You have both collision insurance and gap insurance on your auto policy. Because your vehicle is not totaled, the gap insurance will not provide any payment. However, your collision coverage will help cover repairs to your vehicle (less your deductible).
Gap insurance vs other coverages
There are several types of auto insurance. The main difference between gap insurance and other types of coverage is that gap coverage can only be purchased if you also have P&C and collision insurance and will only cover the difference between an LCA and the remaining amount. ready.
Here’s how gap insurance compares to comprehensive and collision insurance:
|What it covers||Pay the difference between an ACV payment and any remaining loan amount. Does not pay for repairs or replacement.||Covers damage to your car for events such as fire damage, vandalism, weather damage and hitting an animal.||Covers damage to your vehicle as a result of events such as hitting another vehicle or an object, such as a fence or tree.|
|Who offers it||Many auto insurers provide gap coverage, but not all insurers do. Some companies may list it as loan / lease coverage.
Spread coverage can also be purchased at dealerships or through your lender.
|Full coverage can be purchased from most insurers.||Collision coverage can be purchased from most insurers.|
Where to Buy Gap Insurance in Michigan?
Gap insurance providers are quite common, but it is true that some carriers do not offer it. Still, it’s not hard to find. Remember that some gap insurance companies call it âloan / lease coverageâ instead of gap coverage.
If you are financing or leasing your new vehicle, your dealer will likely offer you gap coverage. However, it will most likely be added to your loan amount, which means that you will be paying interest every month. If the dealership offers you the option of paying for it separately, it can be a good deal, but you’ll still want to compare costs with other companies. Most of the time, it is cheaper to do gap coverage with your auto insurance provider.
Gap Insurance Companies in Michigan
As a Michigan driver, you have many options for purchasing gap insurance in most areas. If gap coverage is available in your area, some national companies include:
- Allstate: Allstate is one of the largest auto insurance companies in the United States in terms of market share. So it’s no surprise that it offers additional coverages and a menu of discounts.
- Travelers: While it’s not always the cheapest auto insurance company out there, it still scores well in customer satisfaction surveys. Like Allstate, it offers a good amount of discounts, which you can use to help you with your total insurance costs.
- Mutual Freedom: Liberty Mutual offers a multitude of coverage options, including spread coverage.
- At national scale : Nationwide, known for offering unique discount options like SmartMiles and SmartRide, also offers many coverage options, including spread coverage.
- Progressive: Progressive sells many types of insurance, including spread coverage – be sure to look for it as part of loan / lease coverage.
Local insurers near you may also offer stand-alone gap coverage, which allows you to pay an upfront fee for gap coverage. If you go this route, be sure to compare costs to a national supplier, as the major suppliers may offer a lower rate.
Frequently Asked Questions
How much does gap insurance cost?
The amount you will pay for gap insurance depends on your car and the amount of your loan. This means that there is no set price that drivers pay for gap insurance.
Is Gap Insurance Required in Michigan?
Michigan state law does not require gap insurance, but if you finance or lease a new vehicle, the dealership or lender may require you to purchase it.
Where to buy gap insurance?
Spread insurance can generally be purchased through auto insurance providers, dealers, and lenders. However, there are restrictions on how long you can wait to purchase gap insurance, so if you are considering this coverage you may want to purchase it while your vehicle is still considered new.