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    • If your insured car is totaled in an accident, or stolen and unrecovered, your auto insurance may give you a settlement based on the car’s actual cash value (ACV), not what you paid for it. Since cars depreciate quickly, your settlement may not cover what you still owe on your auto loan or lease.

    That could leave you with no car and a big bill to pay. Nationwide’s gap coverage can help avoid this unhappy scenario.

    What is gap insurance?

    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 coverage adds more protection to your auto policy

    Gap insurance is an optional insurance coverage for newer cars that can be added to your collision insurance policy. It may pay the difference between the balance of a lease or loan due on a vehicle and what your insurance company pays if the car is considered a covered total loss. Without proper coverage, the gap between what you’ve paid and what you owe can be substantial.

    Your lender may require gap insurance

    If you financed your vehicle with a car loan, your lender might require loan gap insurance in addition to your collision and comprehensive coverage. If you lease your vehicle, lease gap insurance may already be included in the cost. Check your coverage paperwork to be sure.

    Actual cash value determines how much your policy pays

    Standard comprehensive and collision car insurance policies help pay for the replacement of your vehicle if it’s a covered total loss – up to the limits of your policy and the car’s actual cash value. ACV is equal to the cost of the car when it was new, minus depreciation for age, mileage, physical condition and other factors.

    After just a year, the ACV of your car can be thousands less than what you paid for it, which can leave you with an expensive loan or lease balance. Nationwide’s gap insurance may cover some, or all, of that amount. This coverage is available in select states and applies to vehicles 6 years old or less.

    Let’s say your car cost $35,000 when new, and you currently owe $30,000. If the car is totaled, the ACV of the vehicle may be only $25,000. You have a deductible of $500, so the car accident settlement is $24,500. Your gap insurance coverage may pay the remaining $5,500 on the loan instead of having to come up with the money yourself.

    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.

    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.

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    Product, coverage, discounts, insurance terms, definitions, and other descriptions are intended for informational purposes only and do not in any way replace or modify the definitions and information contained in your individual insurance contracts, policies, and/or declaration pages from Nationwide-affiliated underwriting companies, which are controlling. Such products, coverages, terms, and discounts may vary by state and exclusions may apply.

    The information included here is designed for informational purposes only. It is not legal, tax, financial or any other sort of advice, nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate in parts. It is the reader’s responsibility to comply with any applicable local, state or federal regulations. Nationwide Mutual Insurance Company, its affiliates and their employees make no warranties about the information nor guarantee of results, and they assume no liability in connection with the information provided.