Does GEICO Sell Gap Insurance?
Last Updated on March 6, 2023
GEICO is one of the largest car insurance companies in the United States. Unlike certain other insurers, however, GEICO does not currently offer gap insurance.
Gap insurance covers the “gap” between the actual cash value of your car and the amount remaining on your loan or lease. Some insurers sell gap insurance, while others, like GEICO, do not.
Keep reading to find out everything you need to know about why GEICO does not sell gap insurance.
No, GEICO Does Not Sell Gap Insurance
Some insurers sell gap insurance, while others do not. GEICO, like several other large insurers, does not currently sell gap insurance.
GEICO does, however, provide an extensive range of insurance products and services in all 50 states. As the second largest insurance company in the country (behind only State Farm), GEICO is a popular, well-rated, and competitively-priced insurance company for many policyholders.
How Does Gap Insurance Work?
Although GEICO does not sell gap insurance, other insurers do. You may also be able to buy gap insurance through your lender. In fact, many lease and financing payments have gap insurance built in.
Even though you can’t buy gap insurance through GEICO, here’s how gap insurance works:
- When you insure a vehicle, your insurance company agrees to cover the actual cash value of your vehicle.
- The actual cash value is the value of your vehicle minus depreciation.
- In many cases, the amount you owe for your vehicle is more than the vehicle is worth – especially on new vehicles, vehicles with long lease or financing terms, and vehicles with a small down payment.
- If you crash your new vehicle, then there may be a large “gap” between the actual cash value of your vehicle (which is the amount of compensation you receive from your insurance company) and the amount you owe the leasing or financing company.
- Normally, you need to pay this gap out of pocket. If you have gap insurance, however, then your insurer covers this gap.
How Gap Insurance Works: An Example
To understand how gap insurance would work if GEICO offered coverage, here’s an example:
You buy a new truck for $40,000. You pay a small down payment and take the longest possible financing agreement. After putting down $2,000 for your new truck, you now owe the remaining $38,000 for your truck.
You drive your truck off the dealership lot. The moment you drive it off the lot, your truck has lost significant value – just like any new vehicle loses value within the first few months of ownership.
One month after buying your truck, you get into a major accident. Your truck is a total loss, which means the cost of repairing your vehicle exceeds the actual cash value of your vehicle. In this case, your insurer sends you a check for the full value of your vehicle.
Unfortunately, the actual cash value of your vehicle is $35,000, and you still owe the lender $38,000 for your truck. There’s a $3,000 “gap” between the value of your truck and the amount remaining on your loan.
If GEICO offered gap insurance, then GEICO would have covered this gap, paying you an extra $3,000 for your claim. Because GEICO does not offer gap insurance, you must pay this gap out of pocket (unless you obtained gap insurance elsewhere).
How to Buy Gap Insurance as a GEICO Policyholder
If you’re a GEICO policyholder, then you can still obtain gap insurance.
Some of the options for purchasing gap insurance include:
- Check your lease or financing agreement to verify if gap insurance is already built into your car payments. Some car payments include gap insurance.
- Ask your dealership about standalone gap insurance.
- Purchase gap insurance from a standalone gap insurance provider.
Typically, buying gap insurance from the dealership is the most expensive option. However, because GECIO doesn’t offer gap insurance, it may be your best option.
Final Word – GEICO Gap Insurance
GEICO doesn’t offer gap insurance, but you can still obtain gap insurance as a GEICO policyholder.
Check your financing agreement to see if you already have gap insurance. Or, buy from a standalone provider to avoid having a gap between your actual cash value and the amount remaining on your loan or lease.