When you buy a car, it starts losing value the moment you drive it off the lot. This is called depreciation. Standard car insurance, like collision and comprehensive coverage, will pay you the car’s current market value if it’s totaled in an accident or stolen. But what happens if you still owe more on your loan than the car’s worth? That’s where gap insurance comes in.

Gap insurance acts as a financial safety net. It covers the difference, or “gap,” between the amount your standard car insurance pays for a totaled vehicle and the outstanding balance on your loan or lease. This can be a significant amount, especially if you made a low down payment or financed your car for a long term.


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