Confused About Progressive 25% Loan Coverage and Gap Insurance?

[likely42]

Hi everyone great forum.

I have a question that I didn't really understand from my agent at Progressive. So I have a car loan that I'm really upside down on (I owe more money than it's worth) my car isn't even worth half of it. My car is from a car brand that is now defunct and the car is high mileage. So if my car were to get totaled out in an accident what would happen to my car loan? They'll only cover 25% of the worth so that means they'll only cover the car and I have to pay the rest of the loan with no car? Would gap insurance be a good idea from my bank that I'm financing my car through? The agent said I can't have both though so could you guys give me insight? ty

 

[djs]

Almost all gap coverage has a cap on how much of a gap they will cover. There are good reasons for this.

How did you end up with a loan for a car that the car is only worth 50% of the loan? This doesn't normally happen..... unless you roll a very large negative equity into the loan and even then, banks usually don't approve these types of deals.

But, heck it happened, so....

What Progressive is telling you is if you have a loan for $20K, a car value of $10K, and then you total the car, insurance will pay the value of the car, $10K, gap will pay up to 25% of the value of the car, $2.5K, for a total to the lender of $12.5K. You will owe the balance of $7.5K to the lender even though you no longer own the car. That is what you signed up for when you took out the loan.

You can only have gap coverage through one carrier. You also usually have to obtain it when you buy the car, most lenders won't add it on later.

My advice: Keep making the payments, don't total your car.

Dan