What is gap insurance?

About Gap Insurance

Gap insurance is an auto insurance policy that covers the difference between the amount your insurance company says its worth and what you owe on your car.

If your car is totalled or stolen, your insurance company will award you only the amount they believe your vehicle is worth. However, you could owe thousands of dollars more to the bank or lien holder. If you don’t have gap insurance, you will be stuck paying the difference out of your pocket.

Many auto dealerships will offer you a gap policy when you purchase your car. However you may be able to find gap insurance at a cheaper rate from a different auto insurance provider. Research on the Internet and call local insurance companies for price quotes on gap insurance.

Remember that gap insurance is a type of coverage that you will only need for the period of time until you pay off your car (or the amount owed is less than the car’s worth).

See also: Gap insurance explained