Define Gap Insurance: This is a type of auto insurance. It is extra insurance for your vehicle that your normal coverage will not cover. A good way to remember it is through the analogy of supplemental health insurance. It is a supplement. It is just to fill in the holes where your normal insurance will not work.
An Example: Say a man named Chris still owes $20,000 on his car loan. But since it has depreciated in value, Kelly Blue Book says that his car is only worth about $15,000. Chris would need to get "gap insurance" to make up the difference, especially when there is a loss due to an accident.
?Chris gets into an accident and loses his car and its abilities. The company will reimburse him for the $15,000, but he still is short five grand. This is what the gap insurance is for. The gap insurance will pick up the difference.
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Finance