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QuestionInsurance Question  Someone purchases a car and gets it insured, plus they purchase additional GAP insurance. They later cancel the regular insurance, but keep paying for the GAP policy. If they total their car, does GAP still kick in even though there is no "regular" insurance? Would GAP just figure the value of the car and pay the difference owed on the loan?

AnswerAuto Insurance Answer

No, as far we are aware there is not a GAP insurance policy that pays out on a claim if your primary insurance company was not in effect nor paid out the actual cash value (ACV) due to the vehicle being declared a total loss.

GAP insurance providers' guidelines may differ but the GAP insurers we are aware of require you to have not only regular (minimum state liability) insurance coverage but also full coverage, thus physical damage coverages of collision and comprehensive, on your vehicle. Normally in order to protect their investment your lien holder will also require you to have collision and comprehensive on the vehicle until it is fully paid off. 

A GAP policy pays the difference between what your physical damage coverage pays and the outstanding balance, and in the situation you described there is no physical damage coverage to pay actual cash value for the vehicle. The GAP insurer would not figure out what an insurance company would have paid for your car and offer you the difference on your loan, they pay out only after your physical damage insurance provider has totaled out your vehicle and paid an actual amount for a settlement.

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