Which of the following accurately describes a condition of gap insurance?

Gap insurance is designed to cover the difference between the actual cash value of a vehicle at the time of a total loss and the amount still owed on a loan or lease for that vehicle. For gap insurance to be effective, it is crucial that the policy is in effect prior to the loss of the vehicle. If an insured event occurs and the policy is not active, the insured would not receive any benefits from the gap coverage.

This condition emphasizes the importance of having the insurance in place before an incident occurs, ensuring that any financial gap can be addressed at the time of the vehicle's loss. Therefore, the correct answer highlights the necessary timing of the policy in relation to the risk of loss.