WalletHub, Financial Company
The main benefit of gap insurance is that it can prevent drivers from owing money to a lender or lessor after a car is totaled, by paying the difference between the actual cash value of the vehicle and the loan or lease balance. Another perk of gap insurance is its low cost.
Benefits of Gap Insurance
- Gap insurance can save you a lot of money if your financed or leased car gets totaled.
- Adding gap insurance to an existing auto policy will usually cost just a few dollars per month. Gap coverage from a dealer is often overpriced, though.
- Gap insurance can provide peace of mind when buying a new car, which is especially important if you saved up for a while to make the down payment.
On the other hand, the main drawback of gap insurance is that it’s a specialized type of coverage. It usually applies only if your car is totaled in a scenario covered by your comprehensive or collision insurance. If your car is damaged but not declared a total loss, gap insurance will not pay. Similarly, gap insurance does not apply if you are simply unable to make your car payments.
Scenarios When Gap Insurance Has the Most Benefits
Gap insurance is important for drivers who cannot afford to pay the remaining balance of their car loan or lease if their vehicle is totaled. Gap coverage also is a good investment for cars with low resale values, which are likely to produce a bigger gap if totaled. Drivers who take out long-term loans with a small down payment should consider purchasing gap insurance as well, since their loan balances will be especially high.
To learn more, check out WalletHub’s guide to gap insurance.
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