As an insurance broker, I’ve seen countless families trust that their insurance will be there when disaster strikes. But sometimes, even when you do everything right—paying extra for additional coverage—you can be left with a financial headache. The recent story of an Ontario family whose car burned “down to a crisp” is a sobering reminder that not all insurance policies protect you the way you might expect.
What Really Happened?
The family in question had purchased GAP insurance, believing it would fully protect them if their new vehicle was written off. After a devastating fire, they discovered a harsh truth: their GAP policy didn’t cover all their losses. This isn’t an isolated incident. Many drivers believe that by adding GAP insurance, they’re completely shielded from financial loss if their car is totaled. Unfortunately, that’s not always the case.
Understanding GAP Insurance: What It Does—and Doesn’t—Cover
GAP (Guaranteed Auto Protection) insurance is designed for those who lease or finance a new vehicle. Its purpose is to cover the “gap” between what your regular auto insurance pays (the depreciated value of your car) and what you still owe on your loan or lease if your car is declared a total loss.
But here’s the catch: GAP insurance only applies if your primary auto policy pays out for a total loss. If your claim is denied due to an exclusion—such as fire caused by mechanical failure—GAP insurance doesn’t kick in. It’s not a standalone policy; it’s a supplement.
Common Exclusions That Can Leave You Exposed
Many drivers are surprised to learn that standard auto insurance policies, even with comprehensive coverage, often exclude fire damage caused by mechanical failure or engine explosion. If your car burns due to a defect or lack of maintenance, your claim could be denied. That means your GAP insurance, which depends on a payout from your main policy, won’t help either.
What Should Consumers Do?
As a broker, my advice is always to read the fine print. Don’t assume that extra coverage means total protection. Here’s what you can do to protect yourself:
Ask direct questions: When purchasing any insurance, ask what is and isn’t covered. Specifically, inquire about mechanical failure, engine fires, and how GAP insurance works with your primary policy.
Consider a waiver of depreciation: For new vehicles, a waiver of depreciation may offer broader protection, ensuring you get the full replacement value if your car is totaled.
Maintain your vehicle: Insurers may deny claims if poor maintenance contributes to a loss.
Work with an independent broker: We work for you, not the insurance company. Our job is to explain these nuances and help you find the best protection for your needs.
Final Thoughts
Insurance is there to give you peace of mind, but only if you understand what you’re buying. Don’t let assumptions cost you thousands. Take the time to review your policy, ask tough questions, and partner with a broker who puts your interests first. That’s the honest advice every consumer deserves.