What is Full Coverage Gap Insurance and How Does it Work?

When your loan amount is greater than the value of your vehicle, full coverage gap insurance pays the difference. This type of insurance, also known as emergency insurance, can be purchased from most major insurance companies, including Progressive, Nationwide, State Farm and Allstate. It can also be offered by your lender as part of the total amount you finance with the loan. Generic drug coverage works differently than discount brand-name drugs.

Medicare will pay 75% of the price of generic drugs during the coverage gap, and you'll pay the remaining 25%. If you have a Medicare drug plan that already includes provisional coverage, you can get a discount after applying your plan's coverage to the price of the drug. Supplemental insurance doesn't cover the comprehensive deductible or the collision deductible. Your deductible is the amount that your insurance deducts from paying a claim. Costs that don't help you get catastrophic coverage include monthly premiums, what your plan pays for drug costs, the cost of uncovered drugs, the cost of drugs covered at pharmacies outside your plan's network, and the generic 75% discount. Once you reach the coverage limit, you won't pay more than 25% of the cost of brand-name prescription drugs covered by your plan.

To determine if full coverage gap insurance is worth taking out, research the actual cash value of your car and compare it to the amount owed on your loan. If you never owe more than what your car is worth, then this type of insurance isn't necessary. For more information on full coverage gap insurance and whether it's worth taking out, see WalletHub's tips on where to buy it. In short, as long as you're willing to check with multiple insurers, you can get supplemental insurance after buying a car.

Carl Somilleda
Carl Somilleda

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