What is gap waiver?

A gap waiver, also known as gap insurance, is a type of insurance coverage that protects car owners from financial loss in the event of a total loss or theft of their vehicle.

When a car is involved in an accident and deemed a total loss, the insurance company typically pays the actual cash value (ACV) of the vehicle, which is the current market value minus any deductibles or salvage value. However, since vehicles depreciate rapidly, there can often be a significant difference between what is owed on a car loan or lease and the ACV.

This is where a gap waiver comes into play. It covers the difference between the ACV and the amount remaining on the car loan or lease, ensuring that the car owner is not left with a financial burden. It effectively "fills the gap" between what the insurance company pays and what is owed.

Gap waivers are typically offered by car dealerships and insurance companies at the time of purchase or lease. They can be purchased as a one-time fee or added to the monthly payment. The cost of a gap waiver depends on factors such as the value of the vehicle and the terms of the loan or lease.

It's important to note that a gap waiver is not mandatory, and car owners can choose to decline it. However, it can provide peace of mind and financial protection if the car is ever declared a total loss or stolen. Before purchasing a gap waiver, it is advisable to carefully review the terms and conditions to understand what is covered and any potential limitations or exclusions.