When Does Gap Insurance Not Pay Drivers in Tennessee?

when-does-gap-insurance-not-pay-tennessee

Summary: Gap insurance won't pay your claim if it's unrelated to your vehicle suffering a total loss or being stolen. Your reimbursement is typically capped at 125% of the car’s value, leaving borrowers responsible for any remaining loan balances. There are many reasons gap insurance may be denied, including policy lapses, previous loan debt, intentional damage, or pre-existing vehicle issues. Understanding these limitations can help avoid unexpected financial burdens.  Estimated Read Time: 4 mins

It can be frustrating to have auto insurance, submit a claim, and have it denied. However, understanding how your policy covers you and when you may not be covered can help drivers in Tennessee avoid frustrations. Gap insurance only pays a claim if it meets the right criteria. Below, we’re exploring the different reasons your claim might not be approved and what you can do about it.

Reasons Gap Insurance Won’t Pay Your Claim in Tennessee

Gap insurance in Tennessee helps cover the remaining car loan balance if your vehicle is totaled in an accident.

However, coverage may be denied if premiums aren’t paid, the policy expires, there’s fraud, or if the car isn’t considered a total loss.

Some policies also have waiting periods, leaving drivers temporarily without protection.

Understanding these rules can help avoid denied claims and keep you financially secure. Take a closer look at the reasons gap insurance won’t pay your claim:

Your Vehicle Isn’t Totaled

Gap insurance won’t pay for your note if your vehicle isn’t totaled. If your vehicle is totaled or stolen, you can submit a claim, however, if it’s just badly damaged but not a total loss, your claim will be denied.

Unrelated Claims

Gap insurance doesn’t cover unrelated claims like comprehensive or collision damage, liability for others' property, uninsured/underinsured motorist claims, personal injury protection, or roadside assistance.

If your claim isn’t related to a total loss, gap insurance will deny it. It is strictly for covering the loan gap following an accident.

Insufficient Policy Limits

Most gap insurance policies cap payouts at 125% of your car’s actual cash value (ACV), leaving you to cover any remaining loan balance if the payout falls short.

Additionally, prior damage that lowers your car’s value without totaling it can also reduce a gap insurance payout if the car is later totaled, creating a coverage shortfall.

To avoid this, consider increasing your liability and collision/comprehensive coverage to match your car’s value, reassessing your policy every 6 to 12 months to account for depreciation.

Ensure your gap insurance policy clearly defines its payout terms, and consider bundling auto and gap insurance with one provider for simpler claims processing.

By doing so, you can prevent unexpected financial burdens and hassles after an accident.

Your Coverage Lapses

Gap insurance does not cover missed payments, fees, or lapses due to disability, death, injury, or unemployment.

If you anticipate missing a payment, contact your insurer, but staying current on premiums is crucial to maintain coverage.

Should your coverage lapse, notify your lender immediately, as some require continuous coverage. Then, shop for a new policy through your insurer, lender, or a third-party provider.

Keep in mind that unfortunately, there is typically no grace period for coverage lapses with a gap insurance policy.

Money Owed on an Existing Loan Balance

If you have an existing loan or lease balance, you can roll it into your new vehicle’s policy.

However, gap insurance typically does not pay any negative equity if you file a claim under normal circumstances.

Some exceptions may apply, but they are very rare.

Intentional/Previous Damage

If you cause damage to your vehicle intentionally or commit fraud, gap insurance won’t cover you. Furthermore, any pre-existing damage is also excluded from your policy.

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Can Gap Insurance Deny Claims in Tennessee?

If your claim doesn’t meet the criteria of your gap insurance policy, your insurer is allowed to deny it in Tennessee.

This includes claims involving wear and tear, a mechanical failure, damage that doesn’t result in a total loss, and other excluded perils.

Illegal activity and fraud are also exclusions, including damage as a result of driving under the influence.

Finally, if you have a gap insurance claim that is denied, be sure that you haven’t reached your policy limits. If you have, you won’t have your claim accepted for full reimbursement.

Always review the details of your coverage to understand how you’re protected to avoid surprises.

How Do You File a Claim With Gap Insurance in Tennessee?

Filing a gap insurance claim can be done over the phone, online, or in person with your insurer.

When you do file, be sure to have the proper documentation ready for a smoother process.

This includes settlement statements, your loan contract, and the police report after the accident/theft.

For an even smoother filing experience, bundling your gap coverage with an auto insurance carrier can help even provide potential discounts.

To save money on car insurance in Tennessee, drivers can compare top-rated carriers to find the best protection for their needs at the lowest cost.

Ask an agent today by calling the number above or use our free, no-obligation quote tool below:

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