Teslas are not the most inexpensive cars out there, but the level of technology, performance, and luxury you get for your money makes them well worth the price tag. Unfortunately, sometimes an accident can total a Tesla while it’s still relatively new. Your standard car insurance should cover your car’s current value, but sometimes you may owe more than its current value. You will still be on the hook to pay this amount, even though you don’t have the car anymore. This is where gap insurance comes in. Read on to learn more.
What Is Gap Insurance?
Gap insurance, or Guaranteed Asset Protection insurance, is optional insurance coverage that you can add to your current auto insurance policy for added protection in the case of a total loss of your Tesla. Essentially, if you lose your vehicle due to an accident, theft, or other covered circumstance, and you owe more on a loan than your standard insurance says it’s worth, gap insurance will foot the bill for the remaining loan balance. Sometimes called lease or loan coverage, some lenders or leasing companies actually require you to carry gap insurance on your policy.
You might consider adding gap insurance to your auto insurance policy if:
- You paid less than a 20% down payment
- You live and work in a high-risk driving area
- You are currently leasing the Tesla
- You financed the car for over 60 months
Why Get Gap Insurance for Your Tesla
Like any car on the market, a Tesla vehicle will lose value over time. A thief may steal your car. You may end up in a car accident, or lose your car due to floods, fires, or natural disasters. If you find yourself in any of those worst-case scenarios, a standard auto insurance policy will only give you a payout of the current market value for your Tesla, which may be substantially less than what you paid for it originally.
Here’s where gap insurance comes in. Simply put, gap insurance covers the difference between your car’s actual cash value and how much you owe on the auto loan that’s paying for the car. If you don’t have gap insurance and the balance on your loan equates to more than your Tesla’s value at the time, you’ll still have to pay off the remainder of the loan yourself. If you get gap insurance on your Tesla, you can protect yourself if any of the aforementioned situations happen and ensure that you get a payout that covers the full cost of what you owe on your vehicle.
What Doesn’t Gap Insurance Cover?
There are some items that gap insurance may not cover. It’s common for gap insurance to not cover any of the following expenses as they relate to your totaled Tesla payout:
- Your auto insurance deductible
- Any security deposits you’ve made on the car
- A down payment for a new car
- Late fees or overdue payments on your loan
- Extended warranties you have on the car
- Charges related to credit insurance connected to your loan
- Lease penalties
- Carry-over balances
How Gap Insurance for a Tesla Works
The way in which gap insurance works to protect your assets and money is pretty straightforward. Usually, gap insurance claims play out like this:
- Upon damage to your car, you file an insurance claim, either with the liability insurance of the other party or with the collision or comprehensive insurance component of your own auto insurance policy.
- The insurance company gives you a payout check for the actual cash value (ACV) of your Tesla per the current market, minus the pre-selected deductible for your policy. For instance, if your deductible is $500 and your Tesla’s worth $25,000 at the time, you’ll receive a check for $24,500.
- If you owe more on the loan than the ACV payout check, your gap insurance pays for the remaining balance. For example, if you receive a payout check for $24,500 and you still owe $30,000 on the car, gap insurance would pay for the remaining $5,000 on your loan, minus your $500 deductible.
Where To Get Gap Insurance
When getting gap insurance for your Tesla, you have several different options. While Tesla itself offers general comprehensive car insurance, the company doesn’t currently offer gap insurance coverage. Because of this, you’ll need to look elsewhere for this type of coverage. Commonly, the following entities offer gap insurance:
- Car insurance companies
- Credit unions
Paying For Tesla Gap Insurance
In many cases, you can pay for your Tesla gap insurance alongside your regular auto insurance. Sometimes it can be included in your auto loan as well. Your specific gap insurance monthly payment may fluctuate depending on changes at the company, changes to your driving record, and any added coverage you may decide to purchase. Usually, adding gap insurance to your collision and comprehensive coverage policy doesn’t add a lot to your insurance payment. The amount that you pay for gap insurance can vary greatly on a number of factors, including:
- The specific insurance company
- Your loan term lease
- How many cars are on your auto insurance policy
- The make and model of your Tesla
- Your driving record
- Your deductible
- Other items covered on the policy
Now that you know all about gap insurance, do you think you’ll purchase this coverage for your Tesla? You never know what could happen, so having this extra coverage may give you peace of mind and keep you safe while on the road.
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.