Few people even know what gap insurance is.Gap insurance protects your vehicle loan. If your vehicle gets stolen or written off in an accident and you owe more than the vehicle is worth, this type of coverage will pay the difference to the company that issued you the loan. Let's say your vehicle was stolen six months after getting the car. You paid $21,000 for the car and took a loan for that amount. However, the vehicle is now worth $17,800 as a vehicle loses a large percentage of its value in the first 3 years of ownership. You've only made 6 payments of $300 ($1800.00) so you'll owe $1400.00 even after the company you're insured with gives you what the vehicle was worth. Here is the calculation; ($21000-$1800 = $19200-$17800 = $1400). Gap insurance pays the difference between what your regular insurance policy must pay (which is the actual value of the car, not the loan) and what you actually owe. As vehicles get more expensive, the difference will be larger. This type of coverage is a necessity as it covers your loan, not just your car. If you didn't get a vehicle loan you don't need this type of coverage.
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