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Is GAP insurance transferable if you sell the car?

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Things to remember...

  • GAP insurance is specifically tied to the vehicle you drive
  • GAP is not a transferable type of coverage
  • If you sell the car, the only thing typically transferable is a warranty

GAP insurance is a helpful type of coverage to have on your vehicle. It is specifically tied to the vehicle you drive, similar to auto insurance. Understanding how it works and how it transfers is critical if you choose to sell your car.

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What is GAP insurance?


You want to do your best in order to protect the investment of a new car or truck. GAP insurance is often suggested by the dealership because it protects the gap between the depreciated value and current market value on your car.

GAP insurance is highly suggested if you buy a new car and you:

  • Rolled over negative equity
  • Made a down payment of less than 20 percent
  • Financed for 60+ months
  • Bought a car that depreciates quickly

When you sit down with the finance department at the dealership, GAP insurance is often suggested. This is something that you can buy directly from the dealership or obtained through a car insurance company.

Since you have to purchase car insurance anyway, it’s often best to try and get the GAP insurance through the car insurance company. You can also choose to add collision and comprehensive coverage without spending a lot of money.

You will be able to get quotes from multiple companies in order to compare the cost of premiums.

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Why GAP and Auto Insurance Should Be Purchased

It’s important to look at purchasing GAP and auto insurance. Both are important, though only auto insurance is required by the state.

Neither one is going to be transferable if you decide to sell your car because the policies are purchased in your name and are specific to your car. If you choose to sell your car, the person who buys it would need to purchase their own auto insurance.

The GAP insurance would not be transferable because it is only available on new cars and trucks. Since you are selling it, it’s no longer classified as new.

You have to look at protecting your own investments. The auto insurance is something that you need to get in order to stay compliant with state law.

Every state has specific types of insurance that you need to obtain. This requirement includes liability for bodily injury and property damage. Some states will also require you to purchase personal injury protection or medical payments coverage.

It is then up to you as to whether you want to add collision and comprehensive coverage.

Additionally, most car insurance companies offer GAP insurance. If you are looking at ensuring a new car, you should look at whether GAP coverage is going to help you. Often, it’s only a few dollars a month to add to the premium.

This low price makes it well worth it in order to protect your investment to the fullest so that the insurance company pays on what you actually go on the car as opposed to the depreciated value.

Without the GAP insurance, your standard insurance policy would only cover the depreciated value. This means you could still end up owing thousands of dollars on the lease or loan of your car.

What is transferable?


You have to look at what is transferable if you decide you want to sell your car. You would be able to transfer the title of your car as well as any warranty that is still in place.

For example, depending upon the make and model you buy, there might be a manufacturer warranty for three years or 30,000 miles.

If you have only had the car for one year and 15,000 miles, the remaining warranty is still valid because it is tied to the car’s VIN and not to you as an individual.

All of these things need to be identified when you choose to sell your car so that the seller knows what they are getting.

GAP insurance policies are great to have on a new vehicle. It adds a significant amount of financial protection in the event you get into an accident. It’s not something that is transferable, however.

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