Delaney Simchuk, Car Insurance Writer
@delaney_simchuk
If you don't have full coverage, gap insurance will start covering you after your car insurance policy limits are reached. Gap insurance pays for the difference between the value of your car after it’s been totaled and the amount remaining on your loan or lease. Standard car insurance will only cover the actual cash value of your car, which could leave you owing thousands on a loan for a car that you’re no longer able to drive if you don’t carry gap insurance.
Full coverage generally consists of liability car insurance at higher limits, collision coverage, comprehensive coverage, medical benefits, and uninsured/underinsured motorist coverage, depending on your state law. Sometimes, the minimum insurance coverage required by state law is only liability car insurance which only covers the damages to the other driver's insurance if you're at-fault in an accident. This means that, if you only have liability coverage and you're at-fault in a car accident, there is no other insurance that can help cover the loan on your car, and gap insurance will most likely not be sufficient, leaving you with negative equity.
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