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Is Gap Insurance Worth It?

Function

  • Gap insurance pays for the difference between what your standard auto insurance policy says your car is worth and what you owe on your auto loan. This means it's valuable for drivers who are upside-down in their loans and owe more than their vehicles are worth.

    Gap insurance only applies in situations where the vehicle is entirely lost, as with a theft, or involved in an accident that results in damage that would cost more to repair than the value of the vehicle prior to the accident. Gap insurance can be useful regardless of whether you're at fault in an accident, since both your insurance and the other driver's will only pay up to what your car was worth before the accident.

Types

  • Gap insurance comes in several varieties. Most gap insurance isn't actually insurance at all; instead, it's a debt cancellation agreement, known as a gap waiver, written into your auto loan. Gap insurance comes from an insurance company, which may or may not be the same company that provides your regular auto insurance policy. Finally, a gap endorsement is a rider that your primary insurer writes into your existing policy. You can add or remove gap insurance at any time, though car dealers may only offer a gap waiver at the time of purchase.



Posted 9:56 AM

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