What is gap insurance?

What does gap insurance cover?

  • I have gap insurance on my car. The car is worth about $14,000 but I owe $15,000 left on my loan. If I were to trade my car in, would the gap insurance cover the 'upside down' amount of 1,000...or does it only cover me in the event the car is in an accident? (I want to trade it in for something less expensive--a cheap beater!)

  • Answer:

    Gap insurance is only in case of an accident.

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No......... You decided to buy a car and opted for a loan to purchase the car. A year passes by and you have been paying up your loan installment accurately, but in the midst of all this your cars get into an accident and its totaled or it’s stolen. You still need to pay off the loan balance in this situation. This is a typical situation in which gap insurance can come to help. If your car is worth a particular value and you still have a loan balance to pay off, gap insurance will pay the difference in these values to you. This is something more than what comprehensive and collision coverage on your new vehicle can do for you.

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