GAP Insurance

Young family and dog in the car for a road trip.

What’s GAP, and do you need it?

You just bought a new car and plan to keep it for years. Bam, two years in, your car is totaled and you’re out that set of wheels. You contact your insurance and find out they aren’t going to pay you the entire loan balance, only the car’s cash value. Now what do you do?

That’s right…if your vehicle were to be totaled or stolen, your insurance company might not pay off the entire loan balance. Most insurance companies only pay the cash value of the vehicle at the time of the loss, and outstanding loan balances are frequently higher than the car’s actual value, which creates a void you’re responsible for. Hopefully you have GAP coverage (or Guaranteed Asset Protection).

What is GAP, other than that question your lender always asks you? If the value of your car is less than the balance of your auto loan, you’re “upside down,” and there is a gap that isn’t covered by standard insurance. This difference requires a special type of protection called GAP. GAP will help you cover the void that’s left when insurance doesn’t pay you what your car is worth. It’s offered on every car loan, the price is determined by the amount financed and the loan term, and is oftentimes rolled into your monthly payment.

You may want to consider GAP if:

  • You made a low down payment
  • Your car make and model depreciates quickly
  • Your loan term is longer than 60 months
  • You drive more than the average driver (over 15,000 a year)

GAP does not cover: Rental car costs, Auto repairs, or Missed payments


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