If you have no primary insurance that is paying out actual cash value (ACV) for your vehicle after it is declared a total loss than your GAP insurance would not usually be able to be used.

Gap insurance is there to cover the difference between the actual cash value paid out for your car after it is totaled out and the balance of your loan so if there is no coverage to pay out the ACV then gap will not pay out. Gap insurance is not there to pay the whole remainder of your loan at the time of an accident just the portion above the ACV of your vehicle. This coverage is thus good for those who owe more on a car than it is worth.

As you know liability only covers the damages you cause to others, whether it be bodily injury (BI) or property damage (PD). Liability coverages do not protect your own vehicle in any way. You need physical damage coverages of collision and comprehensive for this.

Gap insurance policies differ depending upon the company offering the coverage. If you want to have this type of coverage on your vehicle you should read through the terms of the GAP policy you are looking into to find out what claims they will accept and what can be denied.

When a carrier offers GAP insurance it typically has this set as the first eligibility guideline:

Eligibility only extends to a policy providing comprehensive and collision coverage. Coverage applies only in the event of a premature termination of the loan or lease due to a total loss covered under comprehensive or collision. Coverage does not apply to overdue payments, penalty charges assessed for excessive mileage or excessive wear and tear, etc.

Other notable GAP exclusions:

• Overdue lease/loan payments
• Financial penalties imposed under a lease for excessive use
• Security deposits not refunded by the lessor
• Costs for extended warranties, credit life insurance, or other insurance purchased with the loan or lease
• Amounts deducted by the primary insurer for wear and tear, prior damage, towing, and storage
• Carry-over balances from previous loans or leases
• Equipment added to the car by the buyer, meaning that only factory-installed equipment is covered

If you have gap insurance on your vehicle then you need to carry the required physical damage coverages so that your GAP coverage can be used if necessary. If you owe on a lease or loan normally your lien holder will require you to carry collision and comprehensive and can place forced insurance on you if you do not. This type of insurance is expensive and does not really protect you in any way, just the lien holder's asset - the car.

Make sure you have the right coverages on your vehicle so if you are in a total loss situation you will not have to continue to pay on a car that you no longer have use of.