GAP insurance is designed to provide insurance protection for new cars that are being financed. If a car were to be stolen or totaled in an accident, Gap insurance will pay the difference between the cash value of the car and the current outstanding balance on your auto loan or lease. When a new car is driven off the lot, it depreciates quite a bit. If your car were stolen a week later, your insurance company would pay what the cash value is on the car, not what you paid for it the previous week. Because of depreciation, this cash value would be quite a bit lower than what you paid and you would be stuck paying off the difference. That’s where Gap car insurance comes in.

Typically, Gap insurance covers ...