There can be a gap between the amount of the loan and what the insurance will pay out for a totaled car. This type of insurance covers that gap, hence the name.
There are a number of factors why the loan might be higher than the payout. In general, if you need gap insurance you are likely overextended.
Not really. Cars devalue the second you drive them off the lot because it goes from new to used. A totaled car under insurance would get you the cost of a used car, because thats what your car is, even if you just bought it that week. The gap covers the value between new and used. Still a giant scam though.
It’s insurance if you total your brand new car youre paying off , so you don’t end up with no car and -45k+ in debt (having to pay off a car that’s now totaled and being scrapped), annnddd need a new car . If you have gap insurance and total ur car, your old car gets paid off and you’re at null again, or you have a couple extra thousand to throw on a new car. I learned this the hard way after getting tboned in an intersection the 2nd day I had my brand new Subaru and not understanding why insurance wasn’t covering it…🤦🏻♀️ but it’s a huge scam, but unfortunately it’s one that we have implemented into society here, just like many other scams…
12
u/willywonka1971 8d ago
There can be a gap between the amount of the loan and what the insurance will pay out for a totaled car. This type of insurance covers that gap, hence the name.
There are a number of factors why the loan might be higher than the payout. In general, if you need gap insurance you are likely overextended.