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?
“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.”
Did this answer help you?
Ask us a question by email and we will respond within a few days.
Have a different question?
You can meet us at our office and discuss the details of your question.
Read advice from car experts at Jerry
Browse by topics
What others are asking
How do I remove a broken key from the ignition of a 2004 Chevy Tahoe?
Somehow, my key broke off in my ignition when I was trying to pull it out. How do I remove it now?
Jul 22, 2021
Can GAP insurance replace my vehicle after an accident?
My car was totaled in an accident and I have gap insurance. Will it pay for a new car?
Aug 16, 2021
How do you calculate a down payment?
"How do you calculate a down payment on a $38,000 car? I'm buying a car from a dealer. They're offering a finance special that allows me to get 0% financing if I put 20% down."
Jul 28, 2021