Does gap insurance cover theft?

Yes, car insurance covers theft if you have comprehensive coverage, which is optional. Comprehensive auto insurance can help replace your car if it’s stolen or repair damage to your car resulting from break-ins or vandalism.

It is important to note that normal liability car insurance won’t cover theft because it only protects other drivers from bodily injury and property damage resulting from an accident you cause.... read full answer

What Insurance Covers If Your Car Is Stolen

• Your insurance company will pay your car’s depreciated value, or actual cash value (ACV), minus your deductible, if you have comprehensive coverage.
• If your vehicle is financed and you owe more than your car is worth, gap insurance will cover the difference between your car’s actual value and the balance owed.
• If you need help paying for transportation costs related to your car being stolen, rental reimbursement coverage will pay for a rental vehicle.

Car Insurance & Theft of Personal Items

Although comprehensive coverage will apply if your vehicle is stolen, no type of car insurance will cover theft of your personal items from your vehicle. Your phone, laptop, or other valuables should be listed on your homeowners or renters insurance policy, even if you often leave them in your car.

Next Steps

If your car is stolen, file a police report as soon as possible—ideally within 24 hours. Not only will this improve your chances of recovering the car, but you’ll also need a police report to file a claim with your insurance provider. After you’ve filed a report, you should contact your insurer to start the claims process

Gap insurance works by covering the difference between the balance on a car loan or lease and what the vehicle is actually worth if it is stolen or declared a total loss. For example, if you owe $24,000 on your loan and your car is worth only $20,000 when it's totaled, gap insurance would cover the $4,000 gap. Purchasing gap coverage ensures that you don't have to make loan or lease payments for a car that is no longer drivable. This type of insurance is optional, unless required by your lender or lessor.... read full answer

In order to purchase gap coverage, a driver typically needs comprehensive and collision insurance, as well. Collision and comprehensive coverage will pay up to the car’s actual cash value (ACV) if it’s a total loss, and then gap insurance pays off whatever you still owe.

Example of How Gap Insurance Works

Imagine you buy a $50,000 car with a down payment of $10,000. One year later, the car is worth $20,000, but you still owe $24,000 on the loan. If the car is totaled in an accident or stolen, your insurance company will pay $20,000 (the car’s actual cash value), minus your deductible.

If you don’t have gap insurance, you’ll still owe $4,000, and you’ll still have to pay off the car even though you can’t drive it. But if you do have gap insurance, it will pay the $4,000, as you can see below.

Other Key Things to Know About Gap Insurance

• Gap insurance can be purchased from dealerships, banks, credit unions and car insurance companies.

• The money received from your gap insurance policy will be paid directly to your lender or lessor, not to you or toward a new vehicle.

• Some gap insurance policies will cover your comprehensive or collision deductible.

• Gap insurance is not legally mandated in any state, but it can be required by lenders and lessors.

• If you sell your car, pay off your loan early, or trade your car in, you can receive a gap insurance refund.

To learn more, check out WalletHub’s guide on gap insurance.

You can get a gap insurance refund for unused premiums if you paid for coverage up front and then canceled it early. If you are cancelling within 30 days after the policy’s start date, you might be able to get a full refund, minus any cancellation fees. In other cases, only a partial refund may be possible. The details will depend on your policy and your state’s laws.... read full answer

When You Can Get a Gap Insurance Refund

• You are paying off, selling, or trading in the covered car.
• You are switching to a different gap insurance company.
• Your loan balance is no longer more than the car’s actual value, though it’s best to leave a cushion of $1,000-$2,000.

If you need a gap insurance refund because you’re selling or trading in the car, be sure to wait until the car no longer legally belongs to you before canceling your gap insurance. Then, you will need to give the appropriate paperwork to your insurance provider, such as proof of sale or auto payoff letter.

Some gap insurance companies might also require an odometer verification showing the mileage on your car, which you can get from a dealership before you sell or trade in the vehicle.

Similarly, if you’re refinancing, wait to cancel your gap insurance until your previous loan is no longer in effect.

When You Cannot Get a Gap Insurance Refund

On the other hand, drivers cannot get a gap insurance refund if the insured car is declared a total loss before the policy’s expiration date. In this case, the gap insurance will pay for the difference between the car’s value and the loan balance, but drivers will not be eligible for a refund for the remaining months of coverage.

How Long Does It Take to Get a Gap Insurance Refund?

Gap insurance refunds usually take 4-6 weeks. Staying in contact with your gap insurance provider and promptly returning signed paperwork can expedite the process, though.