Negative equity arises when a car's market value falls below the amount owed on a finance agreement, creating a financial burden for the owner. If a car is stolen or written off, standard insurance only covers the market value, leaving the owner responsible for the financial shortfall. GAP insurance protects against this risk by covering the difference between the vehicle's market value and the outstanding loan balance, ensuring that borrowers are not left with negative equity after such events. Different GAP insurance policies vary in coverage, including Return to Invoice and Finance GAP options.
Negative equity occurs when a car's market value is lower than the amount owed on a finance agreement, creating financial stress for car owners.
GAP insurance bridges the gap between an insurer's payout for a vehicle and the outstanding finance balance, providing crucial financial support.
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