Final answer:
Gap protection is insurance coverage that helps cover the difference between the auto loan and the actual cash value of the vehicle. The coverage amount varies depending on the policy terms.
Step-by-step explanation:
Gap protection is a type of insurance coverage that helps cover the difference, or the 'gap', between what you owe on your auto loan and the actual cash value of your vehicle. In the event of a total loss or theft of your vehicle, gap protection will typically pay the difference between your insurance settlement and the remaining loan balance.
The amount of gap protection coverage towards the purchase of a replacement vehicle regardless of deficiency will depend on the specific terms of your insurance policy. Generally, gap protection can cover up to a certain percentage or amount of the outstanding loan balance. For example, if your gap protection policy covers up to 125% of the loan balance, it means that it will pay up to 25% more than the remaining loan amount towards the purchase of a replacement vehicle.