The remaining amount—known as the “gap”—is the difference between your insurance settlement and your outstanding loan balance, which you would be responsible for paying out of pocket if you don’t have GAP coverage.
Here’s how gap insurance works — and how to tell if it’s right for you. What isgap insurance? Gap insurance — also called guaranteed asset protection — is a type of coverage that pays the...
GAP insurance is an optional coverage that pays for the difference between what a vehicle is worth and what a person still owes on a loan or lease agreement. To understand what it’s for, you need to know how fast a new car depreciates once it’s driven off the lot.
Gap coverage, or gap insurance, is a type of auto insurance designed to cover the difference between what you owe on your vehicle and its actual cash value (ACV) at the time of a total loss. This situation typically arises when a car is stolen or deemed a total loss due to an accident.
Gap insurance coverage essentially fills in the "gap" created by the difference between what you might owe on a loan and what your car is currently worth at the time it's deemed a total loss, which factors in any depreciation.
Gap insurance covers that shortfall, preventing you from making payments on a car you no longer have. Note: Maintaining comprehensive and collision coverage is typically required to purchase gap insurance.
Gap insurance is an optional coverage. It pays the difference between what your vehicle is worth and how much you owe on your car at the time it’s stolen or totaled. So this coverage supplements a comprehensive or collision car insurance payout, which can only be as high as your car’s value.
What GAP Coverage Actually Covers At its core, GAP coverage is designed to cover the “gap” between two numbers: the insurance company’s payout for the car’s depreciated market value and the payoff amount you owe to the finance company or lessor.
Gap insurance, or guaranteed asset protection, is a type of optional coverage that helps cover the cost of paying off your loan or lease if you total your car or someone steals it. Most insurers only pay out your car’s depreciated value, which isn’t always enough to cover a loan payoff.
Gap insurance covers the difference between your car's actual cash value and your loan balance if the car is totaled or stolen. You can note the general formula as: Gap Insurance = Loan Balance - ACV.
