What is a Gap in Insurance Coverage, and How to Avoid It

In 2020 43% of US adults were inadequately insured, and over 9% of those insured have a gap in insurance coverage. The thing is, when you purchase any kind of insurance policy, you may think you’re covered for certain losses only to find out later on that you’re not.

There are several insurance gaps you should know about and learn how to avoid them. Having a gap could mean having your claims denied, so you need to prevent them as much as possible.

How You Accumulate Gaps In Your Insurance Coverage

A gap in insurance coverage happens when you’re late with your payment or renewal. If you fail to pay for your plan and have it canceled, it may result in a gap.

If you terminate your policy without purchasing an ERP or extended reporting period endorsement or a tail covering, you risk getting a gap in your coverage. It’s vital that you maintain continuous coverage if you want to avoid having gaps.

Life Insurance Gap

One of the most significant reasons for having life insurance is so that your dependents will have financial stability when you pass away. If you change the circumstances of your life insurance, it may create a gap that may prevent your family from receiving the compensation they deserve.

For example, switching jobs could affect the coverage and put a gap in your policy. The new employer may offer different amounts, so you’ll need to review your policy and make the necessary changes to avoid a gap.

Homeowners Insurance Gap

A majority of Americans don’t understand their homeowners’ policy. If you fall into this category, know that it’s extremely vital that you understand what kind of damages your insurance covers and what it doesn’t to prevent surprises later on. Even when your insurance policy covers certain types of damages, the insurance company may not pay for the full amount.

Most insurance companies place a cap on the amount they would be on replacements. It’s advisable to consult a contractor and get an idea of how much would be needed to replace your home. If you were to make upgrades or improvements in your home before updating your policy, the insurance coverage might not reimburse you fully if disaster strikes.

If someone were to get injured on your property, your homeowners’ insurance would pay a given amount, but you’ll need to pay out of pocket if it exceeds that cap. Imagine if you were to get a million-dollar lawsuit? An umbrella policy may be a worthy consideration.

Most homeowners’ insurance policies also include a lot of exclusions even when they state that they cover all perils. Things like floods, earthquakes, and hurricanes almost always require additional policies. Understanding what your insurance covers will help you avoid gaps that could leave you homeless.

Auto Insurance Gap

When it comes to car insurance, full coverage is never really full coverage because it also comes with a limit. If you carpool or constantly have other people in your car, you may need extra coverage. You see, most insurance policies cover you and your family members, and even that is not always clear cut.

For instance, children living within campus may be covered, and those living off-campus may be denied. If you get a divorce and separate the kids or have them live with you at different times, you need to review your policy to avoid gaps. Your policy may also not cover stolen items such as mobile devices, jewelry, gadgets, tires, batteries, and other items.

If you hire a rental car while yours is being repaired, the policy may limit coverage. Rental car insurance problems are on a whole other level because even if the policy covers the replacement, it may not pay the continual charges the rental company may sue you for.

If you get in a collision with an uninsured motorist, the policy may pay for their damages and not yours. GAP insurance may help you mitigate these risks.

Health Insurance Gap

Covering a gap in insurance coverage is very important for health insurance. Fewer things in life can be more stressful than unexpected health issues, and it would be worse if you have a gap in insurance coverage that prevents getting the compensation.

The most essential thing you should start with finding out when your cover ends, especially if you’re changing jobs. This will help you avoid missed or late payments that could lead to a gap.

You may need coverage in between jobs until the benefits waiting period is over with the new employer. Consider getting other types of insurance covers that will protect you before you renew your health insurance at your new job. For starters, you could qualify for the Consolidated Omnibus Budget Reconciliation Act or COBRA, which will allow you to continue using health insurance for a given time with the new employer if you don’t qualify.

You can easily get a COBRA policy if you leave your job, get a divorce, have one of your kids lose dependency, or get fired. However, your employer may need to have over 20 employees to give you this offer. It may also be quite expensive, but if the gap is relatively short, you may not have to pay anything if you don’t use it.

You can also opt for short-term health insurance plans, which are much cheaper. However, they won’t cover as much as traditional health insurance coverage. It doesn’t cover maternity leave, pre-existing conditions, prescriptions, supplements, and preventative care.

Check out this article source for more information on Medigap plans. The best thing about these is that you can purchase and cancel them at any given time.

Understanding a Gap In Insurance Coverage: Everything You Need to Know

Insurance, whether life insurance, car insurance, health insurance, or any other, is meant to help you in times of great need. It would be unfortunate for you to have a policy that doesn’t cover all your expenses or some types of damages without your knowledge. It would also be unfortunate and very stressful to experience major damages or severe injuries when you have a gap in insurance coverage.

This makes it vital for you to avoid gaps as much as possible to avoid problems when you can’t afford them. For more informative posts about business, personal finance, health, and much more, check out our blog.

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