GAP insurance, or Guaranteed Asset Protection insurance, is a type of insurance that covers the difference between the amount owed on a car loan and the car’s actual cash value (ACV) in the event of a total loss, such as theft or an accident that results in the car being written off.
In other words, if you have a car loan and your car is declared a total loss, your car insurance company will pay you the actual cash value of the car at the time of the loss. However, if the amount you owe on your car loan is more than the ACV of the car, you will still be responsible for paying the difference. This is where GAP insurance comes in – it covers that difference, so you don’t have to pay out of pocket.
Car dealerships or insurance companies typically sell GAP insurance when purchasing or leasing a new car. It is often recommended for people who are financing a car with a high loan amount, as they may be at greater risk of owing more than the car is worth in the event of a total loss.
We recommend that you check with your Insurance Agent to see the price to add GAP coverage to your auto insurance policy. That way, when purchasing or leasing a new car, you can compare the price of what your Agent can offer you versus what the dealership is offering for GAP coverage.