Question

What is gap insurance on a car?

Gap insurance, or Guaranteed Asset Protection, could be used when your car is totaled or stolen, and your regular insurance payout isn’t enough to cover it.

The difference between your car’s actual cash value and the remaining balance on your loan or lease will be covered, so you’re not stuck paying out of pocket for a vehicle you no longer have. 

How does gap insurance work? 

• Standard insurance covers the actual cash value of your car after the deductible. 
• Gap insurance kicks in if you still owe money on your vehicle. It pays the remaining loan or lease balance that your regular policy doesn’t cover. 

When do you need gap insurance? 

Gap insurance makes the most sense if your car depreciates fast, you’re on a long-term loan or a lease, or you made a small down payment. It helps you escape from ending up owing thousands on a car that you can’t drive anymore. 

Here are some instances where gap insurance doesn’t cover: 

• Rental cars 
• Repairs 
• Down payments 
• Interest or late fees