What is Gap Insurance Coverage?
Gap insurance is an optional coverage typically offered by auto dealerships to cover the difference in what you owe on a vehicle, and what that vehicle is actually worth (ACV, Actual cash value) during a claim situation. Gap insurance may pay the difference between the balance of a lease or loan due on a vehicle and what your insurance company pays if the car is considered a covered total loss.
While GAP insurance has the ability to cover many situations, it may be particularly important to those individuals taking out substantial loans without putting any money down on the vehicle being purchased. As vehicles are known to depreciate quickly, this situation could lead to a Gap exposure as soon as a vehicle is taken off the lot.
If the outstanding balance on your auto loan is $14,000, and the vehicle is worth $12,000 at the time of loss due to depreciation, Gap insurance could cover the gap of the $2,000 difference that you would have to pay yourself and would not otherwise be covered for.
Rural Mutual Insurance may be able to cover this type of exposure with an endorsement. Talk to your local agent to learn more.