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I have bought a SUV and when I bought it they offer a GAP insurance which I took it.Till these day I am not familiar with it or knows what is it for or why do I need it ) I have read a post before in here about trading in your car and being upside down on your loan, I am thinking of trading in our SUV for another car, but currently I am upside down in the car by like 8k to 7k. Will my GAP insurance cover that upside down? Or the insurance doesn't work that way? The reason I am trading in the SUV in we are adding a new family member and the SUV is getting to be to small. I am hoping I can find some answers in here. Thanks
The GAP insurance covers the difference between what the car is worth and what is owed on the loan in the event that the car is totaled.
So say the car is worth $10,000 and your loan balance is $15,000. If you get in a wreck and the car is totaled, your insurance company will pay out what the vehicle is worth ($10,000). GAP insurance pays off the balance of the loan (the $5,000). If you didn't have GAP insurance and you were in that situation you would be stuck with the remainder of the balance.
I purchased GAP insurance on all my vehicles when I bought them. Thank goodness, because when my crappy Neon was totaled and I still owed $11K on it, my car insurance covered their part (which I got extra because I purchased their GAP insurance also, 25% more bonus) then the GAP insurance covered the remainding balance. Except for the payments (2) that I deferred to the end of the loan. They will not cover any late payments or missed payments. The only part the pay is everything that was on time and the future amounts.
So yes you made a good decision. I think the cost was only $500 if that!