What does gap insurance cover? Does it cover negative equity from a vehicle that I traded in?

Question

I'm wondering if it is worth it , in case of an accident or it is stolen. thanks:)

Answer 1

gap is to cover the difference in your loan amount if you total the car.  it will not cover the negative equity in the car when you trade it in.  if the car is totaled the insurance will pay the acv on the car then gap pays the difference minus any payments due up to that point.  its NOT that expensive from the dealer and its very well worth it!!!  I've seen a lot of people loss their asses when they don't have it and total the car.

Answer 2

No, it won't cover negative equity.  It covers the difference between actual cash value of your vehicle, and the payoff value, for that vehicle - NOT negative equity.

Answer 3

GAP (Guaranteed accident protection) varies slightly by dealership/insurance company but at a minimum it will cover the amount you owe on the vehicle.

For example if you bought your car and 6 months later you total it GAP will at least pay off the amount you owe, regardless of how much you have paid on it. Some insurers will pay the amount you owe or trade-in value, which ever is greatest.

Bottom line you won't owe anything if the claim you file is a total loss. It is totally worth it! Dealerships usually only charge around $600 and include it in the price of the vehicle when you buy it.

Answer 4

If you are purchasing the GAP on your auto insurance policy, then, no, it will not cover the negative equity rolled from another car loan.  If you buy it from the dealership (or loan company) when you buy the car it MAY cover the negative equity.  The GAP will be much more expensive with the loan company or dealer so be sure to check if it covers the rollover & get it in writing if they say it does.

Answer 5

Basically, it will cover the balance you owe on the vehicle over and above what it's actual current market value is.

Go to Kelly Blue Book and Edmunds.com and see the current market value.  Compare that to what you owe.  If you can't afford to take that hit, get gap insurance.