Gap insurance may not be what you think.
One of the most expensive breakdowns a car owner can have is engine failure. An engine that needs to be replaced can cost thousands of dollars, so you want to protect yourself and your finances if you can. But does gap insurance cover engine failure?
The simple answer is no. We’ll get into the details below, including what gap insurance does cover and how you can take care of your car’s engine.
If you’re shopping for car insurance, make sure you read our article about the nation’s best car insurance companies and try our quote comparison tool. We always recommend getting quotes from at least three auto insurance companies so you can compare cost and coverage. Enter your zip code to get started or call (855) 518-0148 for free, personalized quotes seven days a week.
In this article:
- What Does Gap Insurance Cover?
- Pros And Cons Of Gap Insurance
- Car Warranties Vs Mechanical Breakdown Insurance
- Our Recommendations For Car Insurance
- Frequently Asked Questions
What Does Gap Insurance Cover?
Gap insurance sounds like something that would cover any gaps in standard car insurance, like engine failure. But it’s not. This type of insurance pays the difference between your car’s actual cash value (ACV) and any payments you still owe on the vehicle.
It can come into play after your car is totaled or stolen and you still have a loan with a bank. Consider the following example:
You finance a Tesla Model X that costs $100,000 with $7,500 down. Three months later, your car is totaled by floodwaters. Luckily, you have comprehensive insurance to cover the damages, but assessors only give an ACV of $80,000 and you likely have more than that left on the loan. After all, nothing depreciates quite like a car. Many cars lose 10 percent of their value in the first month after purchase.
The discrepancy between what you owe and what your car is worth is known as negative equity. If you have gap insurance, the difference will be covered.
Other Types Of Car Insurance
Gap insurance doesn’t cover engine failure, so what does? Let’s take a quick look at the six standard types of auto insurance.
- Liability auto insurance: Pays for other drivers’ medical expenses when you are at fault (bodily injury liability) and other drivers’ property damages when you are at fault (property damage liability)
- Collision coverage: Pays for damages to your vehicle after an accident, no matter who is at fault
- Comprehensive car insurance: Pays for damages to your vehicle that result from non-collision events such as extreme weather or theft
- Medical payments: Covers medical expenses for you and your passengers
- Personal injury protection: Covers medical expenses, lost wages, and death benefits for you and your passengers in no-fault states
- Uninsured/underinsured Motorist: Covers you when you get into an accident with an uninsured or underinsured motorist who cannot pay for your injuries or property damage
Unfortunately, none of these policies are likely to cover engine failure. If your engine is damaged during a car accident or extreme weather, you will be covered. But if it fails because of a defect or because it’s old and rusty, you will not be covered by standard auto insurance.
Pros And Cons Of Gap Insurance
If you own your vehicle outright and don’t owe a single car payment, there’s no reason to buy gap insurance. Even if you have an auto loan, gap insurance may not be worth it, but there are many circumstances in which it can be a good idea and save you money.
Gap insurance will protect you if you still owe a lot on your car.
Gap insurance does not come standard with most insurance policies. It will cost you extra.
If you regularly drive many miles, your vehicle will depreciate quickly. The gap between your car loan and your car’s ACV can get very big fast.
The chances of your car being totaled or stolen may be low depending on where you live.
The less you owe on your car, the less you might consider gap insurance. Like cars themselves, the actual cash value of a gap insurance policy depreciates with time. For owners of new vehicles, though, it can be a great investment.
Car Warranties Vs Mechanical Breakdown Insurance
Gap insurance won’t cover engine failure, but there are two types of coverage that will: car warranties and mechanical breakdown insurance.
There are generally two types of warranties: bumper-to-bumper warranties and powertrain warranties. A powertrain warranty covers the components of your car that make it move, including the engine. Bumper-to-bumper warranties cover most everything else, but there are exclusions. In general, auto warranties are intended to cover mechanical breakdowns because of defects or poor workmanship.
Most new vehicles come with a factory bumper-to-bumper warranty and a powertrain warranty. Mileage and term lengths vary, but a common powertrain warranty might cover you for 4 years or 50,000 miles. If your car is new, your warranty is probably still in place.
After the factory warranty expires, you can purchase an extended warranty for cars. Extended warranties can be purchased from the manufacturer or a third party. Conditions vary between providers and vehicles, but engine failure due to mechanical breakdown will almost always be covered by an extended powertrain warranty.
You can expect an extended auto warranty to function similarly to insurance. You pay a monthly or annual premium and may have a deductible.
Mechanical Breakdown Insurance
Mechanical breakdown insurance (MBI) covers mechanical repairs your car may need for any reason. This includes engine repair. MBI is usually more inclusive than a car warranty. Where warranties are often very specific, MBI is more encompassing.
Geico offers mechanical breakdown insurance, but it can only be purchased for cars that are less than 15 months old. Most MBI insurance functions similarly and can only be purchased for newer vehicles. While MBI may offer broader coverage than the factory warranty, newer cars are less likely to have mechanical issues. Also, a 15-month-old car will still usually be covered by the factory warranty. That coverage may not be enough for you though.
As with an extended warranty, you will probably have to pay an insurance deductible depending on your plan and car insurance provider.
Our Recommendations For Car Insurance
Whether you decide to purchase mechanical breakdown insurance or go with collision and comprehensive coverage, you can customize your car insurance policy with a top provider. Remember, price is important in your decision, but it shouldn’t be the only factor. Get quotes from a few car insurance companies so you can compare coverage. Fill out the form below or simply call (855) 518-0148.
Geico: 4.5 Stars
If you want mechanical breakdown insurance, you can get it with Geico auto insurance. But that’s not the only reason to choose Geico. Geico is a full-service provider offering a range of coverage options. This includes standard offerings like collision and comprehensive coverage, and add-ons like roadside assistance and rental car reimbursement.
Geico has a financial strength rating of A++ from AM Best, so you can be confident that Geico will pay out when the time comes. The popular auto insurance company has low rates and many opportunities to save, and its DriveEasy app can be used to track your safe driving and reduce premiums.
USAA: 5.0 Stars
USAA car insurance was the only option to earn five stars in our industry review. USAA has an AM Best rating of A++ and the highest customer satisfaction of any company we’ve reviewed.
USAA is only available to military members and their families. If you qualify, going with USAA might be an easy choice. It is our highest-rated provider for a reason. The USAA mobile app makes filing claims simple, and J.D. Power gives USAA very high marks for claims servicing.
Frequently Asked Questions
Does gap insurance cover engine failure?
No. Gap insurance does not cover mechanical breakdowns. It only comes into play if your car is totaled or stolen to pay out the difference between the amount your car is worth and the amount you owe on your car loan.
Does gap insurance cover major repairs?
No. Gap insurance does not cover any repairs. It only covers you when your car cannot be repaired because it was stolen or totaled. Gap insurance pays for the difference between your car’s actual cash value and the amount you still owe on your loan or lease.
Does gap insurance cover DUI accidents?
Probably not. If you wreck because you were breaking the law, your insurance provider usually won’t cover your losses. Read more about DUI insurance in our guide.
What does gap insurance cover?
If your car is declared a total loss or stolen, comprehensive insurance will pay only the vehicle value as estimated by an insurance adjuster. If you still make payments on your car, the amount you owe may exceed your car’s worth. Gap insurance covers the “gap” between your car’s actual value and the amount you still owe on your auto loan.
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