First, his car was stolen. Now, his lender says he still owes $6,000

If your car was totaled or stolen, would your insurance cover the full amount that you owe?

There is a good chance it will not if you took out a loan for most of the price.

The solution is often gap insurance, which can be a lifesaver for some drivers with big loans.

Unfortunately, a lot of drivers don't realize they need it, until it's too late.

Spencer Kidd is one of them.

He says his Toyota Avalon was stolen earlier this year from a downtown parking spot.

"It was found two days later, stolen and wrecked," he said.

Unfortunately, he still owed money, a lot of money, on the loan.

"Close to $20,000," he said.

But shortly after the loss of his car, he learned his insurance company would not cover the entire loan amount.

"Their final offer payout was only $13,000," he said, "based on the value of the vehicle.

That means he still owes over $6,000, because his car wasn't valued at the amount he owed on his loan, and he didn't have gap insurance, officially known as "guaranteed asset protection."

How gap insurance can protect you

How does it work?

Simple: If your vehicle is stolen or totaled in an accident, Bankrate.com explains that Gap insurance covers the difference between what you owe, and its actual cash value.

Bankrate insurance analyst Shannon Martin says gap insurance on average runs $100 to $150 per year, though it is often cheaper through your insurance carrier than through a dealership.

"If you put a low-down payment or a zero-down payment," she said, "your car is going to lose value fairly quick. So gap insurance might be something worth considering."

If it sounds expensive, keep in mind that you may not need it forever.

"As your car ages, the more you pay into your loan, the smaller that gap tends to become," Martin explained. "So at some point, you will be able to remove it from your policy."

We asked Spencer Kidd's insurer, First Acceptance, if they could offer him more for his Avalon.

A spokesperson said "while the company has empathy for Mr. Kidd's current situation, First Acceptance believes that it has fully met its obligations."

In the meantime, Kidd says he can't afford another car right now, and had to quit his job that was a 20-minute drive.

"I lost my job over this," he said.

So if your car is stolen or badly damaged, remember that your loan doesn't go away.

Make sure you are protected, so you don't waste your money.

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For more consumer news and money saving advice, go to www.dontwasteyourmoney.com.