Gap insurance in Indiana
Gap insurance is optional in Indiana but it can help pay for the gap between your insurance payout and the remaining loan balance on a totaled vehicle.
Written by Bonnie Stinson
Edited by Jessica Barrett
Gap insurance
stands for guaranteed asset protection and it covers the difference between the actual cash value of your vehicle and what you still owe on your loan if your financed car is totaled or stolen.- Gap insurance is a type of car insurance coverage that pays for the “gap” between the standard payout on a totaled car and the amount remaining on its auto loan.
- Gap insurance in Indiana is optional—but if you get it, the state mandates a minimum deductible of $500.
- You must have minimum liability insurance in Indiana to be eligible for gap coverage.
- It’s often cheaper to get gap coverage from your insurance company than from a dealer.
- Gap insurance is atype of car insurance coveragethat pays for the “gap” between the standard payout on a totaled car and the amount remaining on its auto loan.
- Gap insurance in Indiana is optional—but if you get it, the state mandates a minimum deductible of $500.
- You must have minimum liability insurance in Indiana to be eligible for gap coverage.
- It’s often cheaper to get gap coverage from your insurance company than from a dealer.
How gap insurance works in Indiana
Gap insurance is a car insurance policy that covers the gap between the
market value
(actual cash value, or ACV) of your vehicle and any amount left on your car loan if your vehicle gets totaled in Indiana. Without gap insurance, you could be liable for the remaining amount on your car loan—even if the car is totally destroyed.
Let’s look at an example of how gap insurance works:
- You buy a car for $48,000 and it immediately loses its value as soon as you drive off the lot—approximately 20% within the first year.
- Because of interest, your overall loan amount may exceed the vehicle’s market value. For example, your vehicle may be worth $41,000 but you might owe $45,000.
- You get into a car accident and your financed vehicle is declared a total loss.
- Your standard car insurance coverage pays out the market value of the vehicle.
- The $41,000 payment goes to your lender, but you’re still short $4,000.
- Gap insurance helps cover the remaining loan balance so you don’t owe anything out-of-pocket.
Need to know: Gap coverage is only available as an add-on if you already have minimum liability coverage and full coverage. This must include property damage liability, bodily injury liability, collision coverage, and comprehensive coverage.
The gap insurance cost is typically a small monthly add-on totaling about $50 per year. If you go with a dealer’s or lender’s flat rate, you could pay closer to $500.
Extended warranties do not cover a total loss situation.
When do you need gap insurance?
When do you need gap insurance?
You need gap insurance if the coverage limits of your standard auto insurance policy fall short of the vehicle’s total value.
Gap insurance is usually a good idea if you:
- Lease your vehicle
- Finance your car for an extended period (five years or more)
- Make a low down payment on your vehicle (less than 20%)
- Drive a highly customized vehicle or a specific make or model that depreciates quickly
- Rolled over negative equity from a previous vehicle into your current loan
Is gap insurance coverage worth it in Indiana?
In Indiana, gap agreements must include a minimum deductible of $500. But it’s also illegal to charge cancellation fees for gap coverage in the state of Indiana.
To decide whether or not to buy gap insurance, consider these factors:
- Your loan term: Longer loan terms can lead to a bigger gap between the car’s ACV and the balance owed.
- Your financial situation: If your bank account would be wrecked by withdrawing a few thousand dollars, you may need gap coverage.
It’s convenient to buy gap coverage from the dealership or lender, but it’s usually cheaper to get gap coverage from your insurer. In fact, you could unlock additional savings by adding gap coverage with your insurance company!
Gap insurance companies in Indiana
In general, Indiana drivers have two options when it comes to purchasing gap coverage: auto loan lenders (credit unions, banks) and insurance companies.
Here’s a quick list of some major insurance providers that offer gap insurance in Indiana:
- State Farm: Available only if you also finance your vehicle through them. Ask the insurance agent about the Payoff Protector program. It’s not technically a gap insurance policy, but it does cover the balance of your loan if it’s totaled or stolen.
- USAA: Available only if you also finance your vehicle through them. Notable for its very affordable rates.
- Nationwide: Gap coverage is cheaper for most drivers when purchased from Nationwide than from a dealership.
- Progressive: It’s called “loan/lease payoff” coverage at this company, and it’s not full coverage. Instead, you’ll only get up to 25% of the vehicle’s value covered.
Many insurers sell gap insurance, but prices can vary widely. To get cheap car insurance, make sure you compare gap insurance rates at multiple companies and financial institutions before you sign on the dotted line.
Remember:
Get insurance quotes
from different providers to compare rates and ensure you’re getting the lowest price for gap insurance in Indiana.Compare insurance quotes from 50+ insurance companies with Jerry in under 45 seconds
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Do you need gap insurance in Indiana?
No Indiana driver is required to carry gap insurance, either by state laws or by auto lenders. That said, it’s a smart investment for people who make a small down payment, have a very long loan term, or own a model that depreciates quickly.
What’s the difference between gap insurance and new car replacement coverage?
Both types of insurance coverage can help protect you against depreciation if your financed vehicle is totaled in an accident.
Gap insurance covers the difference between your remaining loan balance and the value of your car at the time of the accident.
New car replacement is actually a reimbursement for the replacement of your old car. After you pay your deductible, you’ll get a new vehicle of the same make and model.
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