⚠️GAP COVERAGE: AVOIDING THE $5,000 "UH-OH"

Imagine this: You’re in an accident, and your car is totaled. You’re shaken up, but you breathe a sigh of relief because you have Collision coverage (note that I did not use “Full Coverage”...click on this link to learn why) Your insurance company writes a check for the car's current market value—let’s say $20,000.

Then, two weeks later, a letter arrives from your bank. You still owe them $5,000. Wait... what?  This is where GAP coverage comes in.  

Insurance pays you what the car is actually worth, not what you owe the finance company. Because cars depreciate the second they leave the lot, there is often a "gap" between your loan balance and the value that the insurance company pays.

GAP Coverage pays for this difference so that you don't owe money on a car that you no longer own.

Do You Actually Need It?

You should strongly consider GAP if:

• You put less than 20% down: You’re likely "underwater" on the loan for the first year or two.

• You’re a high-mileage driver: More miles = faster depreciation.

• You rolled old debt into a new loan: That "negative equity" is a massive risk.

Here is how you can get GAP…

You can usually buy GAP at the dealership when purchasing your vehicle but note that some insurance companies also do offer this coverage as well.