What is GAP insurance?
For many drivers, a standard auto insurance policy provides enough protection to cover the cost of repairs or replacement if their car is damaged or stolen. However, if you total your car and the car’s actual cash value is lower than the amount you owe on your loan balance or lease, that difference, or “gap,” is not covered by insurance. Your insurance company won’t pay out more than the car is worth (before it was damaged) — so you will be responsible for paying that amount. Gap protection — which is often referred to as insurance, though it is actually a debt cancellation agreement — is designed to cover this difference between auto value and auto loan. Before you pay for gap protection, though, consider how a gap occurs and how you can close it.
