To the best of our knowledge Gap insurance began to be offered in the early 1980s to help those insureds who purchased a car and due to rapid depreciation of the vehicle found themselves owning more than the car was worth if it was in a total loss situation.

When you owe more than your car is now worth it is referred to being upside-down on your loan or having negative equity. If your vehicle is then found to be a total loss during the time you owe more than it is worth you can be left owing your lien holder for a vehicle you no longer have use of, a bad situation since normally you will need to finance a new car to replace the one that was totaled out and thus are paying on 2 cars.

The higher price of motor vehicles, longer-term auto loans, and the increasing popularity of leasing in the 1980s is what created GAP protection as a type of insurance for car owners. In some instances, this insurance will also pay the deductible on the primary insurance policy so if you are shopping around for Gap insurance you may want to see if this is offered in your area.

Gap insurance covers the gap between what you owe on your auto loan and the current market value of your auto. If your insurance company decides your vehicle is a total loss, your collision coverage will only pay you actual cash value (ACV). Neither your insurance company nor a third party's Property Damage Liability policy will cover any amount you may still owe on your loan above the ACV amount being paid in the claim settlement. Gap coverage thus can help you cover this amount over the ACV amount that you owe.

Keep in mind Gap insurance does not normally cover any late fees or missed payments. Other notable GAP insurance exclusions include:

• 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

Eligibility for gap insurance only extends to an auto insurance 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 and the other items listed above.

When you purchase an auto insurance policy online with CarInsurance.com, most of our carriers offer Gap coverage. It is labeled Loan/Lease Gap coverage. You can purchase it easily with your policy for very little premium. If you don't have a CarInsurance.com policy on your used car than CarInsurance.com offers GAP Insurance as a separate policy through this online partner.