woman with paperwork at desk

Gap insurance is an optional, add-on car insurance coverage that can help certain drivers cover the "gap" between the amount they owe on their car and the car's actual cash value (ACV) in the event of an accident. A car's actual cash value is the car's monetary value at the time of the accident, not the car's original price.

Gap insurance example

Let's say you're involved in a covered accident and are found not at fault. Your car is damaged beyond repair and needs to be replaced. You still owe $15,000 on your auto loan, but your car's ACV is only $11,000 (this is sometimes referred to as being "under water" or "upside down" on your loan). If you have gap insurance, it can help you cover the $4,000 gap between what you owe on your loan and what your car is worth, after your deductible. Not all drivers need gap insurance. But if you are leasing or making payments on a vehicle, you should find out if gap insurance is right for you.

What does gap insurance cover?

The basic concept behind gap insurance is easy enough to understand – but what exactly does it cover? Gap insurance coverage is quite versatile, but be aware that it only covers damage to your vehicle, not other property or bodily injuries resulting from an accident. Here are a few common questions related to gap insurance coverage.

  • Does gap insurance cover theft?

    Yes, gap insurance may cover theft in the event your car is stolen and unrecovered.

  • Does gap insurance cover deductible costs?

    No. Even in the event of an accident covered by your gap insurance policy, you would still have to pay your deductible. In other words, if the "gap" reimbursement amount is $4,000 and your deductible is $500, your total reimbursement amount would be $3,500.

  • Does gap insurance cover engine failure?

    No. Gap insurance is only used in the event of a total loss from a covered accident, not for mechanical repairs.

  • Does gap insurance cover death?

    No. Gap insurance is only applicable to vehicle losses and does not cover bodily injuries, medical expenses, lost wages or funeral costs.

  • Does gap insurance cover negative equity?

    Yes. Negative equity is another term for the gap between what you owe on your auto loan and the car’s actual value.

Learn more

Learn more about gap insurance coverage, as well as other auto coverages Nationwide offers, such as collision, comprehensive, liability, uninsured motorist and more.

Insurance terms, definitions and explanations are intended for informational purposes only and do not in any way replace or modify the definitions and information contained in individual insurance contracts, policies or declaration pages, which are controlling. Such terms and availability may vary by state and exclusions may apply. Discounts may not be applied to all policy coverages.