Does gap insurance pay off your car?

My lender offers gap insurance with my loan. What's the purpose of it? Will it pay off my car?

Answer
“As your vehicle ages, its value depreciates. New cars typically depreciate by about 20% in the first year. Unless you made a sizable down payment, this usually means that you owe more on the loan than the car is worth for the first few years of a car loan.
This is where gap insurance comes in. Gap insurance will pay the difference between the balance of the loan amount and the actual cash value of your car if you’re in an accident.
If you’re unsure about needing gap insurance and can afford the additional cost, it’s worth adding to your loan for extra protection. You can always remove it if you decide you no longer would like the coverage or you reach a break-even point where your car’s value and the loan balance are equal.
If you want to add gap insurance to your current insurance policy, download the Jerry app and compare rates from top insurers in a matter of minutes.”
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Emily Maracle
Answered on Aug 16, 2021
Emily Maracle is a car insurance specialist living in New York. Originally from the Pacific Northwest, she has a degree in English Literature and a background in customer service. She enjoys cooking, gardening, and living sustainably. In the future, she can't wait to upgrade to a hybrid or electric car.
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