What does gap insurance specifically cover?

Gap insurance is specifically designed to cover the difference between the market value of a vehicle at the time it is totaled or stolen and the amount owed on the auto loan or lease. When a car is involved in an accident or theft, its market value can decline significantly, and if the owner is still making payments on the vehicle, they may owe more than the car is worth. Gap insurance helps bridge that gap, ensuring that the car owner does not face financial hardship as a result of this difference.

The other options focus on aspects not covered by gap insurance. For example, while gap insurance does not offer coverage for all financial liabilities related to an accident or cover the cost of personal belongings in the vehicle, it specifically addresses the financial gap that can occur due to depreciation. Additionally, high repair costs for luxury vehicles are not covered under gap insurance, as it solely relates to the financing aspect of vehicle ownership.