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The Importance of Gap Insurance

Gap insurance is a valuable add-on to your car insurance policy, especially if you have a loan or lease on your vehicle. It covers the “gap” between what you owe on your car and its actual cash value if it’s totaled or stolen.

This article explains why gap insurance matters and who should consider it.

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What Is Gap Insurance?

When your car is declared a total loss, your standard insurance pays you the car’s current market value—not what you still owe. If you owe more than that value, gap insurance covers the difference.

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Who Needs Gap Insurance?

• Drivers who lease their vehicles.
• Those who financed a car with a small down payment.
• People who owe more than their car’s depreciated value.

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How Does Gap Insurance Work?

• If your car is totaled, gap insurance pays the balance owed on your loan or lease after your primary insurer pays the car’s value.
• Prevents you from paying out-of-pocket for a car you no longer have.

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Is Gap Insurance Expensive?

• Usually, it’s affordable compared to potential out-of-pocket costs.
• Available through your car insurer or the dealership.

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When Is Gap Insurance Not Needed?

• If you own your car outright.
• If your loan balance is less than or equal to the car’s value.

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📝 Final Thoughts

Gap insurance offers financial protection against depreciation and outstanding loans, saving you from unexpected expenses if your car is totaled or stolen.

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Understand the importance of gap insurance and how it protects you from owing more than your car’s value if it’s totaled or stolen.

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