GAP Insurance
Category: finance
An add-on product that covers the difference between your auto loan balance and the insurance company’s actual cash value payout if the car is totaled.
Vehicles depreciate instantly upon purchase. If you crash a new car a week after buying it, the insurance check might only cover $30,000, while your loan balance is $35,000. GAP insurance pays the $5,000 difference, preventing you from owing a massive balance on a car you no longer own.
Common Examples
- Adding GAP insurance to our loan package gave us peace of mind that we wouldn’t be left with a huge debt if the vehicle was stolen.
- If your down payment is less than twenty percent, GAP insurance is strongly recommended to insulate you from early-term depreciation.