Buying car insurance may include adding additional coverage options to your policy, including gap insurance. Gap insurance can help cover specific concerns after you crash and total a vehicle. But does gap insurance cover death? Understanding what this policy covers can help you decide if it suits your needs. It can also give you a better understanding of this unique policy protection and its overall scope in your insurance plans.
What Is Gap Insurance?
Gap insurance is a policy that covers your vehicle’s value as it depreciates. The first several years of a car’s life will see its value drop considerably, which can be a problem if you get into an accident that totals your vehicle. That’s because you may owe more on the car in a loan than it is worth at the time of the crash. Without gap insurance, your insurance company may not cover your loan value. As a result, you may find yourself paying on a car loan for a vehicle that you can’t even drive anymore.
Gap insurance helps by paying the difference between the loan value and the cash value after a severe car accident. So, if you owe $20,000 on a vehicle worth $16,000 at the time of the crash, your gap policy will pay the difference up to your current policy’s limits. Note that this policy only pays if your car gets totaled or stolen, meaning that it won’t pay for repairs or minor upkeep. People who may need a gap insurance policy include anyone:
- Financing a vehicle for 60 months or more
- Trading in a vehicle that was upside down on its loan
- Paying for a car with no down payment
- Leasing a vehicle rather than purchasing
- Planning to put many miles on a vehicle fairly quickly
But what about bodily injury or even death? Will your gap insurance cover these concerns, or do you need another policy type added to your current car insurance package?
Does Gap Insurance Cover Death?
Gap insurance does not cover death or anything beyond its specific coverage limits. For example, it will not cover medical bills or funeral costs caused by a death. In addition, there are many other things that this policy does not cover that are important to understand before buying this protection type. Things that gap insurance will not cover for you include:
- Crash-related repairs to your vehicle. Typically, vehicle repairs after a crash get covered by collision insurance coverage and not gap policies. Collision is an extra protection level you can add that will fix your car, no matter who caused the accident.
- Down payments on new cars. If you need to buy a new vehicle after an accident, gap insurance does not help you. However, vehicle replacement policies may provide you with a new car at your old car’s current value, though not at its loan value.
- Carry-over balances. When creating a new car loan, your gap insurance does not cover carry-over balances from any other loans. Instead, it will only cover paying off the vehicle’s current loan balance up to the difference in its value.
- Rental cars. If you rent a car while your vehicle gets repaired, gap insurance provides no protection. Rental car insurance policies offer protection for this situation and compensate you for all rental fees.
- Repossessed cars. Repossession is not a vehicle loss because it occurs when a loan provider legally takes a vehicle from you. As a result, your gap insurance does not protect you and won’t provide you with any compensation.
- Extended warranties. Buying extended warranties for your vehicle may provide some compensation when certain parts of a car fail. However, your gap insurance will not compensate you for these purchases after you total a car.
Like most extra policy options, gap insurance covers a particular problem. Thankfully, there are insurance options that you can consider that cover death-related issues. Identifying these policies can help you pick one from your current insurance provider.
What Insurance Does Cover Death?
Car insurance companies provide accidental death benefits, or ADB, policies that you may add to your protection package. Some companies may also call these automobile death indemnity coverage, and you may add them to you and your family’s policy plans by talking with your insurance agent. Typically, these plans will cover a broad range of injury- and death-related concerns, including:
- Medical bills. If an individual incurs medical bills before they pass away, ADB policies will cover these costs up to your current policy limits.
- Funeral and burial expenses. Your ADB policy will pay funeral and burial costs up to your current policy’s limit.
- Loss of wages. An ADB policy will cover an injured person’s loss of wages after a car accident up to their day of death and up to your current policy limits.
When shopping for these policies, understand that an accidental death and dismember insurance plan, or AD&D, differs from ADB policies. You add AD&D coverage to an existing term life insurance plan or a stand-alone policy. This protection can compensate for many situations. For example, it may cover medical payments after you lose limbs, including physical therapy and reconstructive surgery. However, it may also cover vision loss, deafness, speech loss, murder, and even manslaughter because of a traffic accident.
That said, these policies don’t cover all death-related concerns. For example, they may not cover deaths because of dangerous driving behaviors, drug overdoses, drunk driving, heart attacks, and suicide. They may also refuse to cover car racers because of the high risk they take every time they race. Talk to your insurance company about these potential limitations to learn more. For example, racers may find racing-specific coverage protecting them from injuries and deaths while competing.
Hopefully, this information helps you answer the question, “does gap insurance cover death?” Understand that many extra policy options like this may only add a little extra cash to your premium payments. Whether this bonus coverage is right for you will depend on your willingness to spend a little extra money. Talk to your insurance broker about gap insurance and death coverage to learn more about whether they work for your needs.
At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.