Gap insurance covers the difference between the amount you owe on your car loan or lease and the car’s current market value if it’s totaled or stolen. When you purchase a vehicle, its value depreciates quickly, often faster than you pay off your loan or lease. If your car is declared a total loss, your standard auto insurance will only pay out the current market value, not the amount you owe. Gap insurance steps in to cover this “gap,” ensuring you’re not left with a financial shortfall. For instance, if you owe $25,000 on your car but its current market value is $20,000, gap insurance will cover the $5,000 difference. This can be particularly valuable if you made a small down payment or if your vehicle depreciates rapidly.