Gap Insurance: Understanding the Coverage That Fills the Gap
Imagine this: you just bought a brand new car. It's shiny, powerful, and everything you've ever wanted. But then, disaster strikes. An accident or theft leaves your car totaled. You breathe a sigh of relief knowing you have comprehensive and collision coverage, only to discover a shocking truth - the insurance payout isn't enough to cover what you still owe on the loan. This is where gap insurance steps in to bridge the financial gap.
What is Gap Insurance?
Gap insurance, also known as loan/lease gap coverage, is an optional add-on to your auto insurance policy. It protects you in the event your car is declared a total loss by your insurance company, but the Actual Cash Value (ACV) payout isn't enough to settle your outstanding loan or lease balance. Cars depreciate rapidly, especially in the first few years of ownership. If you financed a significant portion of the purchase price or rolled over negative equity from a previous car, the gap...