What Does Gap Auto Insurance Cover? 
On an auto insurance policy gap coverage covers the gap between the cars ACV or Actual Cash Value vs. the loan value of a vehicle . This is a coverage that is purchased when a car is less then a year old and is available on most auto insurance polices for 2 to 3 years and then falls off . An example would be you purchase a brand new car for $ 20,000 and you take out a loan for $ 18,000 . Within a year you total the car . The market value or actual cash value of the car at the time of the accident is $ 16,500 due to quick depreciation . However due to the size of loan and interest rates keeping your principle up you may own $ 17,500 at the time of the accident . This makes a $ 1,000 gap the insurance company is not obligated to pay . Gap insurance would fill this gap so your loan is completely paid off and your not backwards . I recommend you have this discussion with your local agent when purchasing a new vehicle . 