Is Gap Insurance on cars worthwhile?

Answer 1

GAP insurance may well be worthwhile.

GAP insurance is additional car insurance, generally obtained from the dealer that sells the car, that covers the difference between what the insurer pays for a total loss of the car and what may be owing on the car loan.

Normally, if a car suffers a total loss, the insurer will pay the actual cash value. This is the value of a vehicle of like, kind and quality, with similar mileage, accessories, in similar conditon; the actual cash value is calculated for the same general geographic area as the insured vehicle. Because the amount owing on the loan may be more than what the car is worth, GAP insurance pays the difference. rather than the insured being responsible for paying it to the lender.

Naturally, if you paid in full for the car upon purchase, you do not need GAP coverage. Likewise, once you pay off the car loan, GAP coverage may be canceled.