Gap Insurance Coverage
New car buyers usually drive off the lot with insurance, but there may be a serious ‘gap’ in their coverage. A certain type of auto insurance called gap insurance is designed to fulfill this need.
For example, if you purchase a new car for $20,000, then have a serious accident a few months later, your insurance company will only reimburse you up to the market value of the car, (which may have depreciated by 20%)…leaving you responsible for the difference of $4000 in value.
Gap Insurance is designed to pay the difference between what you owe and what the vehicle is worth in the event the car is stolen or destroyed.