If you are either fortunate enough to have purchased gap coverage or even if you were forced to buy it by your lienholder, consider yourself lucky if your car is totaled in a wreck. Gap insurance is first-party coverage you paid for that pays off the difference on your loan if the value of your totaled car is less than the amount you owe on it. As an example, you settle on a value with the insurance company for $19,000, but you still owe $21,000 to the bank. Your gap policy pays the other $2,000. The bank gets the $19,000 from the liability carrier and adds the $2,000 from the gap carrier. Now your loan is paid, but you don’t have a down payment for another car. But wait: the bank will likely work with you if you have been a good payer, and they’ll arrange for the loan to transfer on to the next vehicle. Remember, the bank likes good-paying customers with loans backed by collateral (your car). Talk to your bank or loan company about making the deal.