Gap Insurance: Types, Works, Covers & Full Information

What is gap insurance?
Gap insurance is a type of insurance coverage that helps protect you financially if you experience a total loss of your vehicle, and the amount you owe on the vehicle is greater than the amount it is worth at the time of the loss.

For example, let’s say you purchase a car for $30,000 and take out a loan to pay for it. A year later, you get into an accident, and your insurance company declares your car a total loss. However, at the time of the loss, your car is only worth $25,000, but you still owe $28,000 on your loan. This means you have a “gap” of $3,000 between what your car is worth and what you owe.