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Why does my loan contract have a gap addendum listed on it?
I'm about to purchase a new car and noticed that my finance agreement has a gap addendum listed on it. What does that mean?
Emily Maracle · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“An addendum means an addition to something. Most lenders identify gap addendums as contracts for
gap insurance
. When added to a finance agreement, it amends the agreement to include gap insurance.You now have gap insurance on your vehicle. Gap insurance will pay the difference between the actual cash value of your vehicle and the amount you owe on your loan if you’re in an accident.
As it is common for vehicles to lose value rather quickly when first purchased, gap insurance provides extra protection to ensure you aren’t paying for the remaining balance of your loan out of pocket. If you don’t have an emergency fund or thousands of dollars on hand, it’s actually a smart product to have.
If you’re looking for car insurance on your new ride, make sure to shop around. Download the
Jerry
app to compare dozens of rates from over 50 car insurance companies.”View full answer
- Gregory R.
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