If you own a vehicle, and you have (or are supposed to have) an auto insurance policy, this information applies to that policy. A standard auto insurance policy covers liability, damages and injuries you might cause to others in event of an accident, medical payments if you are injured in an accident, and physical damage if your vehicle is damaged in an accident. These are the basic coverages. There are of course additional coverages available, but these are the major coverages.

However, there are some additional coverages that are extremely helpful to have. These are added by endorsements, forms that modify the policy, and there is typically an additional premium charged for these coverages. For some insureds, these endorsements are an absolute necessity. Let's look at a few.

The first one is the Auto Loan/Lease Coverage endorsement, or gap coverage as it is commonly called. This is essential if you buy a brand new car off the lot and have a loan of more than around four years. Vehicles depreciate as soon as you take them off the lot, and continue to depreciate significantly over the first few years. If you have a loan or a lease on the vehicle and the vehicle is totaled within the first few years, you are apt to be overfinanced, which means you owe more on the loan than the vehicle is currently worth. Your policy will pay you what the vehicle is worth, and that's all. But what about the remaining loan amount? That's something for you to work out with the lender. No one wants to be in this position, so the Loan/Lease endorsement is your friend. It will pay the difference between the value of the vehicle and the remaining loan or lease amount. The vehicle must be listed on the endorsement, and a premium is charged. Be aware that if you are behind in your payments on the loan those catch up payments are not covered, but the remaining amount of the loan is.