Which of the following is a characteristic feature of GAP insurance?

GAP insurance, which stands for Guaranteed Asset Protection insurance, is specifically designed to address a particular financial gap that may arise when a vehicle is totaled or stolen. The key feature of GAP insurance is that it pays the difference between what the insured owes on their auto loan or lease and the actual cash value (ACV) of the vehicle at the time of the loss. This is especially beneficial for individuals who have financed or leased a car, as these situations often leave them owing more than the current market value of the vehicle.

In the instance of a total loss, standard auto insurance typically covers the ACV of the vehicle, which may not be sufficient to settle the outstanding balance on a loan or lease. For example, if someone bought a new car and its value depreciates quickly, they might end up in a situation where they owe more than what the insurer will pay out after a loss. GAP insurance is designed to bridge this financial disparity, making it a critical protection for vehicle owners in such scenarios.

Other options, while related to auto insurance, do not represent the defining feature of GAP coverage. For instance, coverage for theft is a common feature of standard auto insurance policies, while discounts for safe driving pertain to premium rates rather than specific