What can happen if I don't have gap insurance on my financed car?

I declined gap insurance through my lender. What would happen if I get into an accident without it?

Answer
“Without gap insurance on your financed car, you’re responsible for paying the difference between your car loan balance and the actual cash value of the vehicle if you’re at fault in an accident.
For example, if you owe $15,000 on your loan, your car is worth $12,000, and you get into an accident, the car insurance company would only give you a check for $12,000, provided that you have collision insurance. The extra $3,000 would come out of your pocket. If you have gap insurance, the policy would pay for this $3,000 shortfall.
If you don’t have gap insurance, you have to pay the remaining balance of your loan after your insurance pays out the actual cash value of your vehicle. If you don’t have an emergency fund to cover that difference, gap insurance is a smart choice.
Interested in getting gap insurance or changing your car insurance policy? Download the Jerry app to compare rates between top insurers so you’re always getting the best price possible.”
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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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