Gap insurance is known by a wide variety of names including Loan/Lease Gap Coverage, New Car Expanded Protection and Guaranteed Asset Protection, which is the official name recognized by the Colorado Division of Insurance. In some cases it does not operate as a traditional insurance policy at all, but rather a debt-cancellation agreement between you and your lender. This product's regulation varies widely, and often depends on the entity that sells it.
Policy Language
Gap insurance is designed to pay the remaining balance of your auto loan for you if your insurance total loss settlement does not satisfy the loan entirely. Depending on the language of the agreement you sign when you purchase this insurance, however, there may be some restrictions. Some will not pay if the vehicle is totaled during a crime. Others will not pay if you bought the car at a highly inflated price. Gap insurance is typically regulated according to the language in the agreement you sign, so your rights under the agreement are limited by the policy language.
Availability
Typically, you buy gap insurance when you buy your car, and many people finance the insurance with the car loan. The dealership may even imply that gap insurance is not available unless you buy it simultaneously with your car, though this is not always the case. In Colorado, the availability of gap insurance is regulated by the institution that sells it. Certain banks, credit unions and insurance companies may require you to buy it with the car. Others may permit you to buy it up to a year after you buy the car. If you do not or cannot buy the insurance at the dealership, there may be alternatives available later on.
Enforcement
If the gap insurance you purchase is sold through a bank or other financial institution, it is technically a debt-cancellation agreement and there is no regulation of this product beyond the institution itself. You may have to resort to the court system if you cannot reach an agreement with your gap provider. If the insurance is sold through a licensed insurance company, then the policy language and practices of that company are subject to regulation by the Colorado Division of Insurance. You can receive consumer assistance and file complaints by contacting the Division yourself.
Colorado Department of Regulatory Agencies
Division of Insurance
1560 Broadway, Suite 850
Denver, CO 80202
303-894-7499
303-894-7490 (Consumer information)
Tags: Division Insurance, agreement sign, Colorado Division, Colorado Division Insurance, debt-cancellation agreement, language agreement, language agreement sign
