Catherine C Ford, Writer
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Gap insurance does not cover routine maintenance, a damaged car that is not declared a total loss, or missed car payments. Gap insurance covers the difference between a car’s actual cash value and the balance left on the loan or lease if the car is totaled or stolen. This coverage is not required by law, but some lenders and lessors require it for a financed car.
What Gap Insurance Does Not Cover
- The total cost of a brand-new replacement vehicle
- Routine repairs or replacement parts
- Damage to a rental car after an accident
- The cost of using a rental car while your vehicle is being repaired
- Any balance from a previous loan that was applied to your current loan
- The reduced value of your car if it is damaged in an accident but not totaled
- Missed car payments as a result of financial difficulty, injury, disability, or death
- Extended warranties that were part of or added to the original loan or lease balance
- Damage to someone else’s property, injuries, or lost wages as a result of an accident
- The difference between a car’s cash value and the balance of a loan or lease after engine failure
Gap insurance may not pay for your comprehensive or collision coverage deductibles, either, but each insurance company has its own rules in this regard.
To learn more, check out WalletHub’s guide on gap insurance.
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