What is Gap Insurance?

Gap insurance covers the ‘gap’ between what you owe on your vehicle and what it’s actually worth, but what does gap insurance do? It protects you in the event that you have negative equity at the time when your vehicle is damaged! In a little more detail, this means that your insurance payout after a collision will be equal to what you currently owe, and not what the insurance company decides the vehicle is worth.

What Does Gap Insurance Cover?

If you have gap insurance, you won’t have to worry about making payments on a vehicle that’s been totaled—but what does gap insurance cover in practice? In broad strokes, gap insurance protects you against a loss caused by theft, fire, vandalism, an accident, or an act of nature. This means that the gap coverage is about as extensive as comprehensive coverage.

Gap insurance will not cover an engine failure or a mechanical malfunction, and it will not usually pay out for your deductible. Gap insurance will not allow you to recoup the value of your extended warranty, and it will also not pay out in the event of death or personal injury. Gap insurance only ensures that you can pay off your entire loan in the event that the vehicle is worth less than what you owe.

Do I Need Gap Insurance?

It’s a good idea for Camden and Sheridan drivers to purchase gap insurance in the following cases:

• If you’ve purchased a new vehicle, gap insurance can help to protect you against depreciation that occurs as soon as you drive off the lot.
• If you’ve been making the minimum payments or you aren’t paying down your loan quickly, gap insurance can help to ensure that you don’t end up with a large lump sum to pay down after a collision.

If your vehicle is already worth less than what you owe—perhaps you made a very large down payment or you paid for your vehicle with cash—then you do not need gap insurance.

Explore All Insurance and Finance Options at Southern Chrysler Dodge Jeep Ram

Are you still on the fence? Our financing specialists would be happy to walk you through the ins and outs of gap insurance or learn more about financing and insurance requirements for Fordyce and Pinebluff drivers. Contact us today to get started.