What is gap insurance and do I really need it?

Gap insurance covers the difference between what your car is worth and what you still owe on your loan if your vehicle is totaled or stolen. Cars depreciate quickly, sometimes faster than you pay down your loan, so your insurance payout might be $18,000 while you still owe $22,000. Gap insurance covers that $4,000 difference so you're not stuck paying off a car you no longer have. Whether you need it depends on your situation. It makes the most sense if you made a small down payment, have a long loan term, or bought a vehicle that depreciates rapidly. If you owe less than your car is worth, you can skip it. It's typically inexpensive, around $20-40 per year added to your policy.