Hi,

When I owned a new 2007 Honda Civic, the dealer discussed so many insurance policies apart from the regular auto insurance and the dealer was successful in getting two additional insrance policies from me. I accepted the policies without knowing what it was.. This was my first car. Out of those two, one is Gap Insurance. Now, my car is 10 months old and I remember dealer telling that whenever I feel that Gap insurance needs to be cancelled contact him so that I could earn some money.

I have auto insurance from Geico sepeartly but that doesn't cover Gap.

Should I approach my dealer to cancel Gap insurance?

Thanks

Pandy

The reason Gap insurance exists is because a car depreciates rapidly once driven out of the showroom. Lets say, for example that you purchased your new Civic for $15K. Lets say you put down $1500 and financed $13500. Now, as soon as you drive it from the showroom it deprciated is is probably only worth $13K. After 10 months it may only be worth $11K. However, you load balance hasn't gone down as much as the car's value. So you may still owe over $12K.

Now what happens if you get in an accident and the car is totalled. Geico pays off the Blue Book value of the car ($11K), but you still owe the lender another $1000 or more on the loan. Gap insurance covers you for that $1000 or so.

So do you still need it? What you need to do is find out the balance on the loan and compare that to the blue book value of the car. If the value is significantly less then you want to continue the GAP insurance.