Gap insurance covers the difference between its actual cash value and what you still owe on a loan or lease agreement when your vehicle is totaled or stolen, usually as an add-on to collision and comprehensive policies.

Gap insurance can be obtained from either your auto insurer, an independent provider or through dealerships and lenders; they often charge more. Gap coverage isn’t needed if your loan balance falls below the value of the vehicle itself.

Coverage for a Total Loss

GAP coverage covers the difference between your car’s actual cash value (ACV) and what is still owed on its loan or lease agreement in case of total loss. Most insurance providers offer this policy, while financial lenders and dealerships may include it as part of your loan agreement. You can purchase GAP coverage separately through your auto insurer; always compare prices and coverage before purchasing one!

Gap coverage may become essential when your standard auto insurance only pays the Actual Cash Value of a totaled vehicle and not the outstanding loan balance or lease contract balance. For example, let’s say you bought and financed a $25,000 vehicle that becomes totaled after being involved in an accident; under collision/comprehensive coverage this would equal its ACV, leaving an outstanding loan balance of around $15,000. In such an instance, gap coverage might help cover this outstanding amount.

Gap coverage only kicks in in the event of total loss or theft; for minor damages like rock chips and scratches, your regular car insurance will take care of things. At any point you should be able to cancel your gap insurance and you should make sure the company selling it offers a simple cancellation process; typically this information can be found either within their policy documents or by calling them directly.

Coverage for a Delinquent Payment

Gap insurance may be an excellent investment for car owners with outstanding loans or lease agreements who wish to cover any potential theft or total losses of their vehicle, which will cover any difference between its actual cash value and what’s owed on loans/lease agreements if it is stolen or declared total losses. Note, however, that this coverage typically does not provide bodily injury, death or any other coverage related to an accident; nor should it replace regular auto policies.

Say your one-year-old financed vehicle was totaled in an accident and its actual cash value is calculated at $26,000; but you still owe $30,000 on its lease or loan agreement. Gap insurance would provide coverage of that difference of $6,000 between what would otherwise be due on it and what’s left due to no longer owning your car.

Gap coverage may be included as part of your lease or loan contract through the dealership, or purchased independently through independent gap insurers. Most gap policies require collision and comprehensive coverage through your car insurer; many also include deductible payments to cover any discrepancies between their settlement amount and what’s owed on your loan or lease (minus delinquent payments, late charges, refundable services warranties contracts and any related insurance fees). For further inquiries about gap coverage contact your car dealership or an independent agent.

Coverage for a Delinquent Lease

Gap insurance covers the difference between your car’s actual cash value and what is owed on its loan or lease agreement, less any insurance deductible payments, as determined by its actual cash value. Please be aware, however, that it won’t cover certain costs such as those handled through warranties and collision and comprehensive policies; and will only reimburse for what your vehicle was actually worth at its time of total loss and not how much it cost initially or would cost to buy a replacement when totalled.

Gap insurance is typically available for vehicles financed or leased through loans and lease agreements, as well as some owned vehicles. You can buy it from either your dealer or directly through an auto insurer; some lenders also include it in loan or lease contracts as an add-on feature.

Gap insurance can be invaluable when leasing or financing a high-value vehicle, especially if the current market value of it falls short of what is owed on it. Keep in mind that cancellation can occur anytime; simply follow your insurance company’s procedures when doing so.

Coverage for a Delinquent Loan

GAP insurance covers the difference between your vehicle’s actual cash value (ACV) and loan or lease balance, but does not cover repair expenses associated with it. Instead, gap coverage protects against an economic catastrophe should it become totaled in an accident or stolen.

Imagine financing a $20,000 new vehicle and having it depreciate rapidly within one year after an accident due to depreciation. Your insurance company could compensate you up to its current market value minus your deductible, leaving an outstanding loan debt of $28,000 which needs to be addressed by gap insurance.

Gap insurance will cover the difference between your primary insurer’s settlement and your outstanding loan or lease balance, including any insurance deductible up to $1,000. It’s typically available with all auto loans and lease vehicles; however it’s not required by New York state law or by your lender or dealership. Gap coverage can be purchased either independently from an online provider or added onto comprehensive and collision coverage through auto insurers; although dealers usually offer it too; for the best value this should always be purchased directly from them.