How to Avoid Gap Insurance

Gap insurance helps you pay the bank if you have a serious issue while you are upside down on a car loan. From the very beginning a new car is upside down, as it loses significant value right away. Gap insurance is like buyer protection plans on other consumer goods. Buying gap protection may save you money, but you will more than likely spend more money on this type of insurance than you will ever benefit from it.

Instructions

1

Understand what gap insurance is and what it covers. Gap insurance is insurance to cover the amount you will owe if something happens to your car and the insurance on the car doesn't cover all of your loss. Typically, comprehensive auto insurance will cover the value of a car and not the amount of what you owe on a car. Gap insurance pays the difference.

2

Pay a large down payment. If you make a large enough down payment on the car, you will not need gap coverage. The problem is that you will still lose money if you lose your car soon after buying it.

3

Avoid gap insurance altogether. Gap insurance is usually not required; it is sometimes sold by auto dealers as an extra way to make money. It's a risk but most likely you will not need to use gap insurance.