Will gap insurance pay off my loan?
Gap insurance is an optional car insurance coverage that helps pay off your auto loan if your car is totaled or stolen and you owe more than the car’s depreciated value. Gap insurance helps pay the gap between the depreciated value of your car and what you still owe on the car.
Does gap insurance cover trade in value?
If the new vehicle is totaled or stolen, the dealership’s GAP policy pays the difference between cash value of the vehicle and the balance of the loan — including the negative equity on the trade-in. But sometimes insurance companies don’t cover the negative equity on the trade-in in GAP coverage, Reahard says.
Can I trade-in my upside down car for a cheaper car?
Having equity in your trade-in vehicle helps a lot if you’re looking to swap it out for a cheaper car. You have an advantage if the car’s value is equal to or more than the amount left to be paid on the loan. If you’re upside down on your payments, then you have negative equity. Pay the difference out of pocket.
Does gap insurance cover negative equity when trading in a car?
Negative equity is when you owe more on a vehicle than its book value. Gap insurance covers negative equity in most cases of loss, but it may limit coverage depending on certain factors, such as the amount you put down on a new loan or the length of the loan term.
How much does gap insurance usually cover?
Gap insurance would cover the $3,000 difference between what you owe on your car and its current market value, after accounting for deductibles. Some policies also cover the deductible.
Who offers the best gap insurance?
1. Travelers. The best gap insurance company is Travelers because the company’s premiums are generally affordable and it has fewer customer complaints than average. For the price of approximately 5% of the car’s comprehensive and collision premium, Travelers customers can add loan/lease gap coverage to their policy.
Does gap insurance have a limit?
No matter how you decide to obtain coverage, make sure you understand your policy’s limits. Some GAP policies pay the difference between the car’s value and the amount you owe on your loan no matter how big the “gap” is. Others limit the coverage to a specific percentage or dollar amount.
What happens if a financed car is totaled?
If your car is totaled near the end of your financing agreement, you likely owe less on the vehicle than the car’s fair market value (FMV). In that case, the insurance company should send the settlement check to your auto lender. Your lender deducts the amount you owe, and you receive a check for the difference.