Coverage Types
Gap Insurance
Definition
Coverage that pays the difference between the actual cash value of a vehicle and the outstanding balance on an auto loan or lease when a vehicle is declared a total loss. Standard auto insurance only pays the depreciated market value, which may be significantly less than the remaining loan balance.
In Zach’s Words
“You drive your brand-new car off the lot and it instantly loses value. Six months later, someone totals it. Your auto insurance pays what the car is worth TODAY — say $28,000 — but you still owe $33,000 on your loan. Gap insurance covers that $5,000 difference so you're not making payments on a car you can't drive. If you financed or leased a vehicle, especially with a small down payment, gap insurance is a no-brainer.”
— Zach Nadler, CIO