Gap insurance is important for drivers who can't afford the remaining balance of their car loan or lease if their vehicle is totally destroyed. Gap coverage is also a good investment for cars with low resale values, as they are likely to create a larger gap if added up. Drivers who apply for long-term loans with a small down payment should also consider purchasing compensation insurance, as their loan balances will be especially high. The convenience of choosing your down payment: & monthly payments.
This type of insurance coverage pays the difference between the cash value of your vehicle and the amount you still owe in payments for the car in the event of a total loss claim (for example, if your vehicle is stolen or destroyed). Auto insurance companies calculate the cost of supplementary insurance based on your vehicle and driving profile. Gap insurance doesn't pay when a car needs normal repairs, when the car is damaged but isn't reported as a total loss, or when the driver doesn't make the necessary payments. If another driver was at fault, Gap insurance can also cover the difference between your insurance company's settlement offer and the outstanding loan.
Gap insurance comes into play if your vehicle is financed and you file a claim for total loss, either after your vehicle has been liquidated (the cost of repairs would be higher than the value of the car) or if it is stolen. It generally only applies if your car is destroyed in a scenario covered by your comprehensive or collision insurance. Rental reimbursement pays for the rental of a vehicle while it is being repaired after a covered accident, if it's not available for more than 24 hours. It's important to note that coverage insurance only pays when your car is destroyed or stolen, so you can't file a late payment claim if you simply can't make your loan or lease payments.
This is optional additional coverage that can help certain drivers cover the “gap” between the financed amount owed for their car and the actual cash value (ACV) of their car, in the event of a covered incident in which their car is declared a total loss. The main advantage of supplemental insurance is that it can prevent drivers from owing money to a lender or lessor once the car has been totaled, by paying the difference between the actual cash value of the vehicle and the balance of the loan or lease. Full coverage usually includes liability insurance, collision insurance, and comprehensive insurance. Gap insurance can be useful when you buy a new car to cover the difference between its value and what you owe on the loan in the event of a total loss.
Contrary to popular belief, uncovered insurance coverage doesn't mean that your insurance provider will pay you the full amount you originally paid for your car. If your new car sells out in the first few years, you could owe the bank more than your car is worth.