A Deficiency Waiver Addendum will typically waive the amount equal to the unpaid net balance of your car loan or lease less the actual cash value (ACV) of the vehicle paid out by the primary insurance provider after a total loss of your vehicle.

Normally a Deficiency Waiver Addendum is purchased along with your car as part of your financing paperwork instead of it being a Gap insurance policy that you would have obtained separately. An addendum like this may have a maximum claim payment amount of $25,000 or so, depending upon the specific terms of your agreement.

So basically the GAP protection plan you purchased is an addendum to the loan contract on which it was sold with. Any changes to the original loan terms can affect the GAP coverage since it is an addendum to the original loan paperwork.

If your state laws allow banks and other financial institutes may offer you a deficiency waiver addendum instead of you purchasing your own Gap insurance policy. With Gap insurance the insurer would pay the difference between ACV and the balance of your loan on the vehicle when you owe more than the worth of the car at the time of the total loss incident. The Deficiency Waiver instead has the financial institution waive the unpaid loan balance after the ACV amount is paid out.

Usually loan paperwork will say something to the effect of "the named Customer is responsible to the named dealer / financial institution under the terms of the described financing agreement for the amount of any early termination liability resulting from a total loss of the asset (vehicle)." When the Deficiency Waiver is in effect, the dealer / financial institution agrees to cancel a portion of the customer’s indebtedness in the event of a total loss of the vehicle as defined within the terms of the agreement. Depending upon how much more than the ACV of the vehicle is still due to the lien holder the Addendum pay cover the whole balance due or just a portion of it.

If you have a Deficiency Waiver than it should be noted in your financial paperwork just as if you had a gap insurance policy you should have paperwork giving you the details of that policy. If your car has been declared a total loss than go through both your financial and insurance paperwork to see if your negative equity in the car will be covered by either a Deficiency Waiver Addendum or Gap insurance that you bought at the time of the purchase of your vehicle. If you believe you got either coverage from your financial institute that you received your loan or lease through than discuss your coverages with them and find out how to make a claim.