We like to call it gap insurance, but even that isn’t fully correct as it also has gaps of its own. There appears to be a huge misconception when it comes to what people believe about gap insurance, and what it really is. To a lot of people they believe it covers everything their main insurance does not, as well as cover your car payments when you are unable to pay them yourself. This is not true, as you will find out what gap insurance DOES NOT cover, below.
If you are unable to make car payments due to you losing your job for any reason, they will not pay your car payments for any reason. This also includes in case of financial hardships of any kind, as well as disability or a death in the family, in case the one making the payments died. Added to this, gap insurance does not cover repairs that are done to your vehicle. And it does not cover for a rental car if your car is currently being worked on at a body shop either.
Added to the above, it does not cover the balance of a loan on your car or the value of your vehicle if the vehicle gets repossessed. They do not offer compensation in the case of your car losing value due to it being previously in a car accident. They do not offer down payments if you are trying to go for a new car too. They do nothing in terms of any extended warranties that you may add onto your car loan, and they sure don’t do any carry-over of balances on loans that you have made, and rolled over into a loan for a new car.
That is a whole lot it doesn’t do. This is why you need to know this, don’t be misinformed. So, what exactly does it do, you ask? The main thing gap insurance does is in the event of a covered insurance loss, like theft or collision, and your vehicle is a total loss the gap coverage will pay the difference in value that the insurance company gives and what your loan is.
Also, consumers should ask their insurance agent if they offer gap insurance before purchasing it through the car dealership. This has a tendency to be cheaper and it’s not wrapped up in your loan where you are paying interest on the premium.