Among the most damaging consequences of a flooded or water damage car is complete engine failure. Due to the nature of a hydro-locked engine, fixing it will require a lot of time and money to get it back in running condition. For that reason alone, most people might consider using insurance money to pay off all those workshop expenses. Alas, gap insurance doesn't cover mechanical breakdowns such as engine failure or faulty transmission. gap insurance mainly only covers cars that have been totaled or stolen. A car with engine failure might, however, be covered by the factory extended warranty. In particular, a powertrain warranty. Elsewhere, specific mechanical breakdown insurance policies would also be able to help you in the event of total engine failure.