What Does Gap Insurance Cover On A Car? 
GAP coverage is generally purchased on a brand newvehicleeither by the lender or the insurance carrier when youpurchaseyour auto insurance . This coverage is designed to fill the GAP between what the car is valued at and the actual loan amount should there be a total loss . Auto insurance is paid on an ACV -LRB- actual cash value basis -RRB- . In the example of a new car , you may have purchased avehicleworth $ 40,000 and took out a loan . Say for example one year later you total thevehicleand the value of thevehiclea the time of loss is $ 35,000 . This amount is what the insurance company will pay . However due to interest rates and other varying factors your loan amount could be $ 38,000 at the time of loss leaving you with a $ 3,000 out of pocket expense . Or in other words a Gap . However , if you purchased the GAP coverage the Gap would be met by either the lender or insurance company , whoever you took the coverage out with . I always recommend GAP coverage on anewlypurchased vehicle . This coverage generally stays on your policy for 2-3 years and then falls offdependingon the insurance carrier . Talk to your local agent about GAP coverage on your newly purchased vehicle . 