What does Gap Insurance mean?

Gap Insurance is especially important once you do have car insurance. This kind of insurance will actually cover for the "gap" which arises in case your total loss reimbursement is not enough, because it actually doesn't cover for the sum you need to pay for your leasing. It is a typical situation of when your car loan exceeds way more the actual market value of your car.

Gap Insurance explained

For instance, by checking the Kelly Blue Book, you'll find that your car is worth $10,000, but you still need to pay $15,000 for it on your loan contract. So, in case your car suffers damages and it cannot be repaired, or your car is stolen, then your insurance policy will compensate you with the equal of the actual market value of your car, which in this case is $10,000. As the situation can be observed, there remains a gap of $5,000, which you will be covered for only in case you contract Gap Insurance, otherwise that gap becomes an actual debt for you.