Gap Amount
Categories: Accounting, Banking
You head outside to get in your car and go to work. But...your car isn’t there. You call the insurance company, and they tell you they will cover $5,000 of the car’s worth. You still owe $7,000 on the car, leaving a $2,000 dollar gap between the two amounts. So, because someone stole your car, you still owe $2,000 dollars plus the cost of a new car.
Some insurance companies offer gap insurance to protect consumers from losing money because of that gap amount.