Auto gap insurance (also known as "guaranteed asset protection" or "GAP insurance") is a type of auto insurance that covers the difference between the amount you owe on your car and its actual cash value if your car is totaled or stolen and not recovered.
When you purchase a car, its value begins to depreciate as soon as you drive it off the lot. If your car is totaled in an accident or stolen, your auto insurance company will typically only pay you the actual cash value of the car at the time of the loss. This amount may be less than what you owe on the car if you have a loan or lease.
Gap insurance can help cover this difference so you do not have to pay out of pocket for the remaining balance of your car loan or lease. It is often offered by car dealerships, but can also be purchased from some insurance companies. The cost of gap insurance can vary depending on the value of your car and the length of your loan or lease.
If you have a car loan or lease and your car is worth less than what you owe, gap insurance may be a good option to consider to protect yourself financially in the event of a total loss or theft.
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