How does gap insurance work after a car is stolen?

Gap auto insurance pays the remainder of your loan balance in the event of a theft. The average cost of gap auto coverage is $1.67/mo.

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Oct 20, 2021

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Things to Remember...

  • Gap insurance should be a consideration for all car buyers with a loan.
  • If your vehicle is stolen, be sure to report it to the police and be prepared to provide copies of the report to your insurance companies.
  • As auto and gap insurance companies must protect themselves from paying out on a fraudulent claim, the claims process can take some time.
  • Although it is helpful to have, comprehensive coverage it is not generally required to file a claim with your gap insurance policy.

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When choosing a policy, be sure your policy covers vehicle theft. Having your vehicle stolen can be very traumatizing.

Many victims feel violated, some in many different ways. You may feel like someone was able to pull a fast one on you or that your privacy has been invaded.

No matter your feelings and the circumstances surrounding your vehicle theft, you are now left to deal with the aftermath.

Covering the Gap with Gap Insurance

Surprisingly, the majority of cars will lose at least 20 percent of their value within the first year of ownership.

Unfortunately, for most vehicles, their value starts to go down shortly after they are driven off of the dealer’s lot.

This means that on the off chance you were to total your new car on the first drive home, you may end up owing on the loan even after your car insurance company paid on the claim.

This is because when a vehicle is totaled, the auto insurance company pays out what it believes the fair market value of the vehicle is.

Their assessment of fair market value doesn’t take into consideration what you still owe on the loan for the vehicle.

In some situations, this will create a “gap,” so to speak, between what the insurance company pays and what you still owe the bank for the vehicle.

Gap insurance should be seriously considered in the following situations:

  • If you put less than 20 percent down on the vehicle
  • Have a loan that is 60 months or longer
  • Have a leased vehicle
  • Bought a vehicle that depreciates at a faster rate than others
  • Put negative equity from a previous car loan into your new loan

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Where to Purchase Gap Insurance

You can generally get gap insurance at your car dealership. However, most car insurance companies do offer it in addition to other auto insurance coverage types.

If you are leasing your vehicle be sure to check with your leasing company, as most provide gap insurance and simply roll the charge into your monthly lease payments.

Theft and Gap Insurance

In order to get benefits from your gap insurance when a vehicle is stolen, the vehicle has to be declared a total loss by your auto insurance company.

This can happen if the vehicle is recovered with enough damage done to it by the thieves that cause your insurance company to consider it a total loss.

Or, it can happen if the vehicle is never recovered at all. In the latter circumstance, most insurance companies impose a waiting period to see if your car will turn up.

If you have to wait for your auto insurance to act and pay out on this claim, you will also have to wait for your gap insurance claim.

Although gap coverage usually covers theft, you should check your insurance policy carefully to see how thefts are handled.

In many cases, you will be required to file and submit a copy of the police report in order to claim the benefit of gap insurance.

Insurance companies are allowed to make their own policies and it is important to be aware of them and act accordingly in all situations.

Comprehensive Coverage and Gap Coverage

If you have not elected to have comprehensive coverage on your vehicle, you have no other protection on your vehicle in the case of theft, other than your gap coverage.

You may have been denied comprehensive coverage or you may not have wanted to pay for it.

In some cases, however, your gap insurance will still cover the claim even in the absence of a comprehensive policy. That said, comprehensive is usually required in order to carry gap coverage.

Remember that gap insurance is designed to pay for the “gap” in between what your comprehensive coverage pays out on the loss for the theft of your vehicle, based on fair market value, and what is still left to be paid on your auto loan.

If you have no comprehensive coverage to draw from, your insurance company that carries your gap policy will most likely give your vehicle a value based on a rating bureau’s data, like Kelley Blue Book, and pay only the difference between that value and the loan balance.

In most cases, this will not be enough money to pay off the loan completely. Again, it is important to check your policy and be aware of its provisions and regulations.

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Gap Insurance and Fraud

Car insurance companies know that there is a high risk of fraud when it comes to vehicle theft claims.

In order to protect themselves, insurance companies require complete investigations than the normal comprehensive or collision claim.

This decreases their risk of paying out on a fraudulently filed claim. However, their thorough investigations can cause a delay in claims that are legit.

If you need to file claims, including a gap insurance coverage claim, after having a vehicle stolen, expect it to take some time and be willing to follow along and be cooperative in the process.

Steps to Follow if Your Car is Stolen

  • Make a police report as soon as possible.
  • Get copies of the reports to submit to your insurance companies.
  • File your gap and comprehensive claims.
  • Be prepared to wait for the timeframe outlined in your policies to see if your stolen car is recovered.
  • During this time, it is important that you continue to make any car payments or insurance premium payments that become due and owing.
  • If it is not recovered or is recovered with enough damage that the insurance company deems it a total loss, your comprehensive policy will pay out and then your gap policy will pay the remainder to satisfy your total car loan balance.

While having a stolen car can be quite overwhelming, following the instructions of your auto insurance company will help ensure that you have access to all of the coverage you have paid for.

If you would like to find affordable auto insurance rates online, consider using an online comparison tool. Start comparing car insurance rates now by entering your zip code in our FREE tool below!

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