Gap insurance covers the difference between the amount you owe on your car loan or lease and the actual cash value (ACV) of your vehicle if it’s totaled or stolen. When your car is declared a total loss, standard auto insurance typically pays only the current market value of the car, which can be significantly less than what you still owe, especially if the vehicle has depreciated rapidly. Gap insurance steps in to cover this “gap,” ensuring you’re not left paying out of pocket for a car you no longer have. This coverage is especially beneficial for those who made a small down payment, financed for an extended period, or purchased a vehicle that depreciates quickly.