What is gap insurance?


What is gap insurance?

The financial term of the day is: "Gap insurance."

Gap insurance is not sold at a certain casual-clothing store at the mall, and it's not a dental plan for when you have spaces between your teeth. Rather, it's a type of auto insurance that's offered mainly when you lease a car. Maybe you've heard what they say about how a car starts to depreciate as soon as you drive it off the lot. If a newer car is wrecked or stolen, regular insurance will pay what the vehicle is worth, but you might owe more than that. Gap insurance fills that gap.

My rich and reckless friend totaled his new Lamborghini, and gap insurance helped replace the car. So look out -- he's back on the road.

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