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USAA Gap Insurance: What It Is and Why You Need It

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If you’re in the market for a new set of wheels, you might have heard about USAA gap insurance. What is it, and do you need it? Let us help you understand the ins and outs of this product. We’ll share essential tips to help you navigate your way through the process.

What Is Gap Insurance?

Image via Flickr by osseous

Gap insurance is an optional coverage plan you can purchase for your new car. This policy will help pay off your auto loan if someone steals your vehicle or it becomes totaled in a wreck and you owe more than its market value. This product pays the difference or “gap” between your automobile’s value at the time of the accident and what you still owe on your car loan. You can typically only buy this type of policy for new cars, and you must be the original owner.

After an accident, you want your new car restored to its pre-crash condition. However, sometimes that doesn’t happen. If the damage costs more to fix than your vehicle is worth, your adjuster can declare it a total loss. According to United States Automobile Association (USAA), some states require insurance companies to total a vehicle when the damage exceeds a percentage of its value.

USAA doesn’t offer actual gap insurance, but it does provide similar products. Here, we’ll discuss the USAA products that are similar to gap insurance.

USAA Total Loss Protection

USAA members who have a car loan through the company can purchase Total Loss Protection. This product works just like gap insurance in that it will cover the difference between what you owe and your car’s value up to $50,000. However, you can only buy this protection if your vehicle is less than seven years old and if you have a car loan with a balance of at least $5,000.

USAA Car Replacement Assistance

Car Replacement Assistance (CRA) from USAA can also cover the same costs as traditional gap insurance. Whether you bought a car outright or have an auto loan through another lender, you can purchase this coverage from USAA. The difference between gap insurance and USAA’s CRA program is the latter product pays 20% more than your car’s actual cash value (ACV). This coverage is something to consider if you’re upside down on your loan.

Filing a Claim With USAA Insurance

USAA is an excellent option for auto insurance. It’s available to military service members and their families, and it comes with low-priced products and discount programs for qualifying customers. This company’s agents also provide some of the best customer service in the industry, with high claims satisfaction ratings and few complaints across all its products, including gap coverage.

Once your USAA adjuster totals your vehicle, you’ll receive a check for its ACV, less your collision deductible. To get the claims process started, you’ll need your bill of sale and an odometer statement so your insurance company can value the vehicle. You’ll also need your certificate of title so you can turn ownership over to USAA.

How Does USAA Value Vehicles for Gap Insurance?

So how does USAA put a price tag on your wheels? First, your adjuster determines the vehicle’s ACV based on its condition before the crash. Then, they will compare it to similar vehicles in your area to come up with a market value. Remember, this amount might not reflect the price you paid for it. Because cars depreciate so quickly, about 10% within the first month according to CarFax, you might be surprised by the number you get.

Because USAA doesn’t have many in-person locations, most customers will interact with the company exclusively online or over the phone during the valuation process. Provide your agent with the make, model, and year of your vehicle, as well as all its options, so you get the most accurate valuation. Be prepared to show receipts of any significant upgrades you made after purchasing the car, such as a new paint job.

If you and the adjuster can’t agree on a fair value, you can always appeal the decision and ask USAA to hire an appraiser. This expert will make an impartial decision to help you and your insurer reach an agreement. Once you settle on an amount, USAA will make payment. If you still owe money on your car and have gap insurance, your gap insurance provider will pay your lender first, and you’ll receive any remaining balance.

How Much Is Alternative Gap Insurance From USAA?

You can expect to pay a $269 flat fee to purchase USAA’s Total Loss Protection. This gap-like policy covers the difference between your car’s value and the balance you owe, less your deductible. We found that USAA’s rates were well below average. Even drivers with recent accidents on their records received quotes 12% below the national average. In fact, a minimum coverage policy from USAA costs just $53 a month on average.

You might also qualify for USAA’s many discounts, including multi-policy and multi-vehicle programs, as well as deals for equipment such as anti-theft devices. The premium drivers discount is available if you’ve maintained a good driving record for five-plus years. If you have teen drivers in the family, make sure they’re getting at least a 3.0 GPA to receive another discount.

Replacing Your Vehicle

Now that your car is totaled, should you buy a new car? Yes. USAA will take possession of your vehicle after a total loss. Some owners prefer to hang on to a salvaged vehicle and fix it themselves, especially if the damage is cosmetic and the car is still mechanically sound. Just remember that the car will have what’s called a “salvaged” title, and it may be difficult to insure and resell. Also, know that not every state will allow you to keep a wrecked car.

Your insurance policy likely has rental car coverage, but only for a limited time. Once you receive your settlement check, contact USAA and get a preapproval letter for a new car loan. Having this document in hand will save you hours at the dealership and put you in a solid position to negotiate sticker prices.

Hearing your insurance company totaled your new car can be an unpleasant experience. With our guide, you’ll more confidently navigate USAA’s insurance reimbursement process. You’ll be cruising the street in your new wheels in no time.

FIXD Research Team

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.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.

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About the Author

FIXD Research Team

FIXD Research Team

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.

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