What is a gap waiver?

A gap waiver is a type of insurance that provides coverage for any outstanding balance on a loan or lease in case of a total loss of the vehicle. If a car is stolen, damaged beyond repair, or totaled in an accident, the insurance settlement may not cover the entire loan or lease balance, leaving the owner responsible for paying the difference. A gap waiver protects the borrower from this financial loss by closing the gap between the insurance settlement and the amount owed on the loan or lease. Gap waivers are often offered as an add-on to a car insurance policy or through a dealership at the time of purchase or lease. The cost of a gap waiver varies depending on the amount of the loan or lease and the term of the agreement.