What Does Gap Auto Insurance Cover?

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    Mark Bartlett CLCS
    Branch Owner, TWFG Insurance Services, Fremont California and the Greater Bay Area Representing Dozens of Insurance Carriers
    On an auto insurance policy gap coverage covers the gap between the cars ACV or Actual Cash Value vs. the loan value of a vehicle. This is a coverage that is purchased when a car is less then a year old and is available on most auto insurance polices for 2 to 3 years and then falls off. An example would be you purchase a brand new car for $20,000 and you take out a loan for $18,000. Within a year you total the car. The market value or actual cash value of the car at the time of the accident is $16,500 due to quick depreciation. However due to the size of loan and interest rates keeping your principle up you may own $17,500 at the time of the accident. This makes a $1,000 gap the insurance company is not obligated to pay. Gap insurance would fill this gap so your loan is completely paid off and your not backwards. I recommend you have this discussion with your local agent when purchasing a new vehicle.
    Answered on June 5, 2013
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