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If my car is determined a total loss in an accident, will my gap insurance cover my down payment?

I recently purchased a used car for $5,500. I made a $1,000 down payment and then got a loan for an additional $4,500 at the bank. Will my gap insurance cover the initial thousand-dollar down payment?

Feb 4, 2020 Manchester, TN

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Ross Martin

Insurance Writer

  • 4+ years in the Insurance Industry

Ross joined The Zebra as a writer and researcher in 2019. He specializes in writing insurance content to help shoppers make informed decisions.

Ross h…

Thanks for reaching out to The Zebra. Gap insurance will only cover what is left on your loan after an insurance company pays out. In other words, no, it won't cover the down payment you made initially because it wasn't part of the loan amount.

Gap coverage is best purchased if you are going to have a significant difference between the loan amount and the value of the vehicle. If you are putting money down and the vehicle value is more than the loan, then don't buy the gap coverage because you won't see a benefit from it.

Purchasing gap insurance can be a helpful option if you're purchasing a brand-new vehicle, for example. Take this scenario: you purchase a brand new $30,000 vehicle, which will lose value as soon as you drive it off the lot. According to Kelley Blue Book, you might see a depreciation of 20% in the first year. If that vehicle is totaled in an accident a year after you buy it and the insurance company will only pay you the $23,000 it's now worth, and you still owe $27,000, gap insurance would step in to pay the $4,000 difference.

Cars are one of the most expensive things we buy in our lifetime, so consider your options and take your time choosing the right coverage, whether it's for a new or a used vehicle. You can also call us at 1-888-255-4364 to chat with a knowledgeable agent about your specific circumstance and decide on the best coverage options to fit your needs.

Hope this helps!

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