Your car gets totaled. Does the payout cover the loan?

SlashGear walked through what happens to a car loan when the vehicle is declared a total loss. The short version: your insurer writes a check for the actual cash value of the car on the day of the crash, that money goes to the lender first, and if it does not clear the balance you still owe the rest on a car you no longer have.

This bites hardest in the first two or three years of a loan, when a new vehicle has already shed a chunk of its value but the balance has barely moved. Long loan terms, small down payments, and rolling negative equity from a trade-in all widen the hole. Gap coverage is the fix, and it usually costs a few dollars a month when added to your auto policy. Dealers sell their own version at the finance desk, often bundled into the loan at a much higher price, so compare before you sign. If you financed with less than 20 percent down or stretched past 60 months, check your declarations page for gap. If you paid cash or you are near the end of the loan, you probably do not need it.

An independent agent can check whether your policy already carries gap, price it if it does not, and drop it once the loan balance falls below what the car is worth.