GAP insurance is helpful during the early years when you are paying on a lease or loaned vehicle. With this type of coverage if a total loss occurs the GAP insurance will pay the difference between the actual cash value (ACV) and the current outstanding balance on the lease or loan.

So in your situation if your vehicle was declared totaled by the insurance company they will pay out ACV to the lien holder. You stated that your belief is that ACV will be about $5000 or $6000. If that is the case than GAP insurance should pay the difference on the $10,000 that you owe, about $4000 or $5000 depending on what cash value the insurance company gives for the vehicle.

The GAP insurance thus pays the financial institute that you still owe the balance of the loan to. They do not pay back money which you have previously paid on the vehicle. The money you have already paid is typically thought of the as the price one pays for having use of the vehicle.

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