Guaranteed Asset Protection (GAP) insurance is a valuable add-on for many vehicles and at Dynamo, it’s one of our most popular products. As long as your vehicle is 8 years old or younger at the time of inception and has covered less than 80,000 miles, we will be able to provide you with GAP insurance for your vehicle.
In a nutshell, GAP insurance provides financial protection by covering the difference (i.e. “GAP”) between the actual cash value of your vehicle and the amount you owe on your car loan or lease. However, like all insurance policies, GAP insurance has its limitations and there may be occasions when GAP insurance doesn’t pay out as we discuss below.
When Does GAP Insurance Not Pay Out?
1. Commercial Use of The Vehicle
One of the most common reasons for GAP insurance denial is the commercial use of the insured vehicle. For example, many people use their cars for work-related purposes, such as delivery drivers.
Therefore, it’s crucial to understand that standard GAP insurance policies typically exclude coverage for commercial use. If you fail to disclose this use to your insurer, you might be left with an unpaid GAP in case of an accident or theft.
To avoid this issue, always be transparent with your insurance provider about the primary purpose of your vehicle. If you’re using it for commercial purposes, you may need to explore specialized commercial car insurance options to ensure full coverage.
2. Race & Track Use
Another important consideration is the use of your vehicle on a race track or for racing purposes. Most GAP insurance policies explicitly exclude coverage for accidents that occur during racing or track events. Even if you don’t consider yourself a professional racer, participating in these activities can void your GAP insurance coverage.
Before engaging in any such activities, review your insurance policy carefully and inquire with your provider about any potential coverage limitations. To protect your investment, consider purchasing additional insurance specifically designed for high-performance or track use vehicles.
3. Lost Keys Without Changing The Locks
Losing your car keys can be a frustrating experience, but it can also lead to GAP insurance complications. Some GAP insurance policies may not cover theft or damage to your vehicle if it occurred because you lost your keys and failed to change your locks or security system promptly.
To avoid this situation, always report lost or stolen keys to your insurance provider immediately and take the necessary security precautions, such as changing locks, to prevent unauthorized access to your vehicle.
4. Driving Under The Influence
Driving under the influence of alcohol or drugs is not only illegal but also a surefire way to void your GAP insurance coverage. If you’re involved in an accident while impaired, your insurer will likely deny your claim. This holds true not only for GAP insurance but for most car insurance policies as well.
To protect yourself and others on the road, never drive while under the influence of alcohol or drugs. It’s not only a legal requirement but also a matter of personal safety.
5. Accepting A Settlement Offer Without GAP Insurer Consultation
Perhaps one of the less-known reasons for GAP insurance denials is accepting a settlement offer from your motor insurer without consulting your GAP insurer first.
When you file a claim with your motor insurer, they will assess the value of your vehicle and provide you with a settlement offer. However, this offer may not always cover the full amount you owe on your car loan or lease.
Before accepting any settlement offer, it’s essential to contact your GAP insurer. They can help you determine whether the offer is sufficient to bridge the gap between the insurance pay out and your outstanding loan or lease balance. Failure to consult your GAP insurer could lead to financial hardships if the settlement falls short of your obligations.
Conclusion
GAP insurance can be a lifesaver when it comes to protecting your finances in the event of an accident or theft. However, understanding its limitations is just as crucial as having the coverage itself. To ensure that your GAP insurance pays out when you need it, remember to:
- Be honest about your vehicle’s use, especially if it’s for commercial purposes.
- Avoid racing or track use unless you have appropriate coverage.
- Act swiftly when you lose your keys and make necessary security changes.
- Never drive under the influence of alcohol or drugs.
- Consult your GAP insurer before accepting a settlement offer from your motor insurer.
By following these guidelines and being aware of the reasons why GAP insurance may not pay out, you can make the most of this valuable protection and safeguard your financial interests on the road.
