"negative equity" got me like ?? ?? #adulting https://t.co/4it7FAuTp2
— Adulting101.how (@adulting101how) September 25, 2017
Gap insurance comes in when the car owner has incurred a loss but has a balance on loan larger than the book value. The car owner can buy gap insurance to protect themselves from an arising loss that they can undergo when the total compensation from the loss fails to meet the amount the insured owes the lease agreement.
For instance, let’s say you own a car that is worth $12000 and you still owe a bank a car loan of $16000. And then your car is utterly destroyed in an accident or stolen. Your car insurance coverage will only cater for the $12000 and leave you with the other amount that you owe the financing company. If you had purchased gap insurance, the gap insurance would come in to breach the gap of $4000 or the difference between the amount you owe the financing company and what the insurance gives you.