What Is GAP Insurance?
Contrary to what many drivers believe, gap insurance will not actually give you enough money to replace a totaled car with a brand new one. The “gap” isn’t the gap between what insurance pays and the original price of the vehicle either. The gap is actually the difference between the current value of the car and how much the driver owes on it.
Gap insurance will pay off what you still owe after the insurance claim, but if you’ve paid made a few or even most of your payments, gap won’t be enough to pay for a brand new car of the same model.
It’s still very useful to have gap insurance, of course. If you still owe money after your insurance has paid you for the current value of the car, you’ll be paying on a car you can’t even drive anymore. Gap will take care of that, and it’ll definitely be a load off your mind after you fight with your insurance company. You’ll just have to settle for a cheaper car this time around.