But in the event of a total loss from accident or theft, your auto insurance is designed to pay your lender the auto's current cash value, not the loan balance. So, if you owe $25,000 on the loan, but the current cash value is only $15,000, you can see the conundrum you would be in if you totaled the car. You'd still owe the lender $10,000.
If you have that kind of money at your disposal, then it may not be a problem. But if you don't have the money, that's where gap insurance steps in. The insurer pays that difference to the lender.
0 Comments