What is Gap Insurance?

You’ve heard of health insurance, homeowners insurance and even pet insurance — but what about gap insurance? No, it’s not coverage for your moderately priced khakis and tasteful sweaters. It’s for your car, or more specifically, it’s for the full value of your car. Find out if gap insurance is right for you and your car in this week’s segment of Driving Smart.

[drewhadams]

Pointless to get GAP unless you like throwing money away. If you really want it, buy it from a credit union or insurance agent, but not from the dealer.

[Tazytots]

Entirely pointless to get GAP insurance on a car like a Supra, or a WRX. The second hand, aftermarket demand is so high that those cars hold value for eternity.

[vertigelt]

I don't think this is quite right. If my car was originally worth $40k, car is totalled when it's current market value is $20k, but my loan principle is still $25k, I think the gap coverage is the $5k between the $20k replacement value and the $25k owed. Your video implies that the gap coverage will cover the $20k between the totalled car's current value (before it was totalled) and the ORIGINAL value before depreciation.

If so, I should get gap insurance on my 21 year old truck (worth about $1500), do $1500 damage to it, then collect a check for the original $30k I payed in 2000.

No... Gap insurance only makes sense if you think the replacement value of your (used) car is less than what you owe on it (or you think that it will depreciate faster than you can reduce the principle).

[balls_deep_]

If you need gap coverage then you either got a really bad deal or you are taking too long to pay off your vehicle