3 of 3

Write now Article Tools

Most of us think that Gap insurance will pick up the difference between what the insurance company pays and what is owed, in the event of a total loss. Think again!

I recently purchased a vehicle for my daughter because she has bad credit and couldn't get a loan. Due to her physical age (25) and her maturity (18), I decided to get the Gap insurance. She totaled the vehicle approximately 3 months later. Luckily, she was not seriously injured.

I assumed the vehicle would be paid off (isn't that what Gap insurance is for?) However, the Gap insurance would not pay more than 150% of the value of the vehicle, which left me owing $1200.

So, when deciding whether or not to purchase Gap insurance, weigh the cost of the Gap insurance against the odds of the vehicle being totaled, and THEN make a decision. In my case, it kept me from having to pay $5,000, but I was disappointed that I had to pay anything at all. Most of us are under the false assumption that the loan WILL BE PAID OFF. That, I have learned, is NOT ALWAYS THE CASE.

Moral of the story: Think twice about purchasing a vehicle for your grown child who has bad credit. It may just be that he/she has bad credit FOR A REASON! Tough love is a beautiful thing...

Learn more about this author, Maryanne Golden.
Click here to send this author comments or questions.

Add your voice

Know something about Understanding Gap insurance and your auto loan?
We want to hear your view. Write now!