Progressive stands out as a top choice for usage-based insurance, gaining popularity for its seamless quotes process and top-rated mobile app.
While it might not be the cheapest option out there, Progressive provides a usage-based insurance program tailored for high-risk drivers.
Apart from offering gap coverage, referred to as loan/lease payoff insurance, Progressive provides the standard six coverages and various additional options.
The insurer boasts an impressive A+ financial strength rating from AM Best. We give Progressive a rating of 4.3 out of 5.0 stars, recognizing its diverse coverage choices and ease of access, especially for drivers with higher risks.
Understanding Gap Insurance: Bridging the Financial Gap
Gap insurance is an optional auto insurance coverage that helps cover the difference between your car’s actual cash value (ACV) and the amount you still owe on your loan or lease.
This coverage is particularly beneficial if you have a newer car or if you made a small down payment, as depreciation can quickly decrease your car’s value.
How Gap Insurance Works: Protecting Your Investment
Let’s consider an example to illustrate how gap insurance works. Say you finance $30,000 for a new car.
After a few years of making regular payments, your car is now worth $20,000, but you still owe $25,000 on your loan. This $5,000 gap is where gap insurance comes into play.
If your car is totaled in an accident, your comprehensive or collision coverage will typically pay you the ACV of your vehicle, which in this case is $20,000.
However, without gap insurance, you would be left to cover the remaining $5,000 out of pocket. This can be a significant financial burden, especially if you were already making payments on your loan.
Gap insurance can be particularly valuable in the following situations
Leasing a car: Many leasing companies require gap insurance to protect their investment in the vehicle.
Making a small down payment: If your down payment is less than 20% of the car’s sale price, you could end up with negative equity, meaning you owe more on the car than it’s worth.
Gap insurance can help protect you from this financial risk.
Financing a car for a longer term: The longer your financing term, the more likely it is that you will owe more on the car than it’s worth at some point. Gap insurance can provide peace of mind during these periods.
Owning a car with a high depreciation rate: Some cars depreciate more quickly than others. Gap insurance can be especially valuable for these vehicles to protect you from the rapid decline in their value.
Protect Your Investment and Your Financial Future
Gap insurance can provide valuable peace of mind knowing that you are financially protected in case of an unexpected car loss.
By understanding the benefits and limitations of gap insurance, you can make an informed decision that safeguards your investment and your financial future.
Where to buy gap insurance
Dealer:
When you’re buying or leasing a car, the dealer may offer gap insurance as part of your financing discussions.
However, buying gap insurance through the dealer might be pricier because the coverage cost is often rolled into your loan, which means you’d be paying interest on the gap insurance.
Auto Insurer:
Adding gap coverage to your existing or new auto insurance policy is another option, provided your loan or lease isn’t fully paid.
Securing gap insurance through an insurance company is generally more cost-effective, and you won’t accrue interest on the coverage. If you already have car insurance, contact your current insurer to determine the cost of adding gap coverage to your policy.
Keep in mind that comprehensive and collision coverage are prerequisites for adding gap coverage to your car insurance policy.
The choice between the dealer and your auto insurer depends on your preferences and financial considerations. Make an informed decision that best suits your needs.
The most gap insurance pays
Gap insurance typically covers the entire remaining balance on your loan or lease.
The precise payout is determined by your vehicle’s actual cash value, the outstanding amount on your loan or lease, and the policies of your insurance company.
In essence, gap insurance bridges the financial gap between what you owe and what your vehicle is worth, ensuring that you’re not left with a substantial financial burden.
If your gap insurance policy has a limit, it may only pay a portion of the difference between your car’s ACV and the outstanding balance on your loan.
Here are some factors that can affect the maximum amount that gap insurance will pay:
- The type of gap insurance policy you have
- The value of your car
- The amount you still owe on your loan or lease
- The state you live in
Number of claims you can make on gap
You can only make one claim on gap insurance. This is because gap insurance is designed to protect you from a single, specific event: the total loss of your vehicle.
Once you make a claim on your gap insurance policy, the policy is considered spent, and you cannot make any further claims.
If you replace your totaled vehicle with another one, you will need to purchase a new gap insurance policy for that vehicle. This is because each gap insurance policy is specific to the vehicle it is covering.
Here are some reasons why you can only make one claim on gap insurance:
- Gap insurance is designed to cover a single event.
- Gap insurance is typically only sold for new or leased vehicles.
- Gap insurance is relatively inexpensive, so it is not cost-effective for insurance companies to allow multiple claims on a single policy.
Documents needed to file gap insurance claim
When filing a gap insurance claim, you need to provide specific documentation that illustrates the disparity between your loan or lease balance and your vehicle’s value when it was stolen or deemed a total loss.
The following documents may be requested by the gap insurance provider:
Insurance settlement statement: This document shows your car’s actual cash value and the reimbursement from your vehicle insurance company for the loss.
Settlement check: A copy of the check issued to the lienholder/lessor by your vehicle insurance company, indicating the settlement amount.
Loan or lease contract: The original contract outlining the financing terms for your loan or lease.
Loan history: A comprehensive list of charges and payments on your account, including the current outstanding balance.
Police report: A copy of the police report detailing the car’s incident and timing.
Sales agreement: The initial sales agreement from the dealer, specifying your car’s purchase price.
If you’ve purchased gap insurance from the same provider offering your comprehensive and collision coverage, they may already have access to some of these documents, simplifying the claims process.
Is purchasing gap insurance a wise investment?
In many scenarios, gap insurance is a sound investment.
Insurance companies like Progressive offer gap insurance at reasonable rates, providing protection against potential expenses in the event of your vehicle being stolen or declared a total loss.
The current landscape of rising interest rates and extended loan terms has resulted in more individuals owing more on their vehicles than their actual value.
Gap insurance serves as an affordable safeguard, particularly when acquired through your insurance provider.
It’s important to note that while traditional auto loan lenders or the law don’t usually mandate this coverage, lease agreements often require it.
Therefore, it’s advisable to review the terms of your specific agreement if you are leasing a vehicle.
Frequently Asked Questions
What is Progressive Loan/Lease Payoff Insurance?
Progressive Loan/Lease Payoff Insurance (loan/lease payoff coverage) is a type of gap insurance that helps cover the difference between the actual cash value of your vehicle and the outstanding balance on your loan or lease if your vehicle is totaled or stolen.
Why should I consider Progressive Loan/Lease Payoff Insurance?
If you owe more on your car loan or lease than your car is worth, you could be left with a significant financial burden if your car is totaled or stolen. Loan/lease payoff insurance can help protect you from this financial loss.
When should I consider purchasing Progressive gap insurance? You should consider purchasing Progressive gap insurance if you’re financing or leasing a vehicle, have a long financing term, made a lower down payment, or want protection against depreciation.
Some leasing companies may also require gap coverage.
How does Progressive gap insurance work? If your vehicle is stolen or declared a total loss, Progressive gap insurance covers the difference between your outstanding loan or lease balance and the ACV of your vehicle, minus your deductible.
Can I add Progressive gap insurance to my existing policy? Yes, you can typically add Progressive gap insurance to your existing car insurance policy, as long as you have comprehensive and collision coverage. Check with Progressive for specific details and pricing.