What is GAP Insurance?

Guaranteed Asset Protection (GAP) insurance can financially protect you if your car is stolen or totaled. This coverage is meant to complement comprehensive or collision coverage. After you file a claim using your collision or comprehensive insurance, and you have received a check for the fair market value of your vehicle; GAP insurance can cover any remaining fees owed to your auto loan lender.

How Does GAP Insurance Differ From Regular Auto Insurance?

Typical insurance policies only provide coverage for a stolen or totaled vehicle up to the fair market value (also referred to as the depreciated value); having no obligation to pay off an auto loan. Comparatively, GAP insurance will cover the difference between the fair market value of your car and what you owe on your auto loan; paying off your auto loan in full. However, you will not receive funds from this policy after your vehicle loan has been paid in full.


GAP insurance may not be available for every make and model of vehicle. Furthermore, some insurance set specific requirements that limit the vehicles this insurance may apply to. For example, some insurance companies require the vehicle to be no older than 2-3 years, while others require that you be the vehicle’s original owner. 

Who Should Purchase GAP Insurance?

You should consider purchasing GAP insurance if you purchased a new vehicle with less than a 20% down payment; your financing term exceeds 60 months; you are leasing a vehicle; the vehicle you purchased depreciates faster than the average vehicle; or you are upsidedown in your auto loan due to negative equity from a previous loan.

Where can I Purchase GAP Insurance?

GAP insurance can be purchased from a dealership when you purchase a new vehicle. You can also purchase this insurance coverage from your auto insurance provider, or your auto loan lender. However, if your purchase GAP insurance from your lender, its cost will be rolled into your auto loan. Meaning, you will pay interest on your GAP insurance policy. 

Alternative Insurance Policies

Alternatively, you can purchase a ‘loan/lease payoff’ policy; which applies not only to new vehicles but to used vehicles as well. However, a loan/lease payoff policy only provides a certain percentage of your car’s fair market value; stacking on top of your claims payout from your main insurance policies. However, loan/lease payoff coverage is not guaranteed to pay off your auto loan.

You can also purchase a ‘new car replacement’ policy. This policy pays for a new car of the same make and model as your totaled or stolen car, minus the policy deductible. Note some insurers sell GAP insurance and new car replacement coverage together. Therefore, you should be familiar with your insurance policies.

Were you or someone you know involved in a recent auto accident? Call Auto Accident Care Network now at 801-683-1948 to connect with a live care advocate. Our team at AACN can connect you to trusted attorneys and doctors to schedule a free legal consultation, a free thirty-minute massage, and a no-cost medical exam!

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