GAP Coverage
GAP insurance (Guaranteed Asset Protection) is optional auto coverage that pays the difference between your car's actual cash value (ACV) and what you still owe on your auto loan or lease if your vehicle is totaled or stolen, protecting you from owing money on a car you can't drive. It's most valuable when you owe more than the car's worth, common with new cars, long loans, or small down payments, and covers the "gap" your standard insurance doesn't pay. Coverage under this endorsement applies only in the event of a premature termination of the loan or lease due to a total loss under comprehensive or collision.
How it works
- Standard insurance payout: Your primary insurer pays your car's ACV (what it's worth at the time of loss).
- The "gap": If your loan balance is higher than the ACV (e.g., you owe $20k, but it's only worth $15k), you're responsible for the $5,000 difference.
- Gap insurance pays the gap: It covers that $5,000 shortfall (minus your deductible) so you don't have to pay out-of-pocket.
What it covers (and doesn't)
- Covers: The loan/lease balance difference after a total loss (accident, theft, fire, natural disaster).
- Doesn't cover: Repairs, down payments, rental cars, or accrued interest/fees.
Who needs it
- People with long-term loans or leases.
- Those with low down payments.
- Anyone financing a rapidly depreciating new car.
- Drivers whose lenders or leases require it.
Where to get it
Your auto insurance company (often as an add-on), The dealership when financing/leasing, and Directly from some lenders.