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If you have a financed car and it’s declared a total loss, gap insurance can be helpful. It covers the difference between what you owe on your car loan and the car’s actual cash value (ACV) determined by your insurance company.

Gap insurance benefits and process

  • Coverage of remaining loan balance – It pays off the remaining loan balance after your primary insurance settlement.
  • No out-of-pocket payment – Without gap insurance, you might have to pay the remaining loan balance out of pocket.
  • Lender and loan terms – Gap insurance ensures you’re not burdened with paying a car loan for a car you no longer possess.

How gap insurance covers you for a totaled financed car

When your car is declared a total loss, your insurer calculates its value. Your primary insurance pays you the car’s ACV as calculated by your insurer. Later, gap insurance covers the difference between the ACV payout and your remaining loan balance.


Owning a financed car comes with risks, but gap insurance offers protection. It bridges the financial gap so you’re not stuck with a loan after a total loss. Always review your policy terms and ensure you have the coverage you need.