Guaranteed Auto Protection (GAP) Insurance: Coverage Explained (2024)
Guaranteed Auto Protection (Gap) insurance is an optional auto insurance coverage that saves you from paying the remainder of your auto loan when your vehicle is declared a total loss. Gap insurance costs as little as under $2 per month. Some of the best Gap insurance providers are Allstate and Liberty Mutual.
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Ty Stewart
Licensed Insurance Agent
Ty Stewart is the founder and CEO of SimpleLifeInsure.com. He started researching and studying about insurance when he got his first policy for his own family. He has been featured as an insurance expert speaker at agent conventions and in top publications. As an independent licensed insurance agent, he has helped clients nationwide to secure affordable coverage while making the process simpl...
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UPDATED: Sep 7, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
UPDATED: Sep 7, 2024
It’s all about you. We want to help you make the right coverage choices.
Advertiser Disclosure: We strive to help you make confident auto insurance decisions. Comparison shopping should be easy. We are not affiliated with any one auto insurance provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
On This Page
- Guaranteed auto protection (Gap) insurance stands for guaranteed asset protection and helps pay off upside-down car loans for totaled vehicles
- You can buy gap coverage through an insurance company or dealership, but insurance companies usually offer lower prices
- You can cancel gap insurance once your car’s value exceeds how much you owe on your loan
It’s important to carry guaranteed auto protection (Gap) insurance on a financed car. You might owe more on your car loan than your insurer will pay out if your new vehicle gets totaled due to damage or theft.
Gap coverage is a type of auto insurance that steps in to pay the remaining loan balance so you can replaced your vehicle sooner. Looking at a totaled car value calculator will help you find the best value for your totaled car.
Learn more about gap insurance below, including where to buy it, if you need it, and whether you can get stand-alone gap insurance. Then, compare gap insurance quotes from different companies to find the best price possible.
Pros and Cons of Guaranteed Auto Protection Insurance
Wondering if Gap insurance coverage is right for you? Consider the following reasons to buy it, as well as the reasons why you may not want to:
The only way to decide if gap insurance is right for you is to explore your options.
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Understanding More About Gap Auto Insurance Coverage
Gap — or guaranteed asset protection — is an add-on you can purchase to protect yourself in case you total a car you have a loan or lease on. How does gap insurance work after a car is stolen?
When you have an auto loan, you’ll likely own more on the loan than your car is worth for the first few years. Owing more on your car than it’s worth is referred to as an upside-down or underwater loan.
Having an underwater loan is not usually bad, but it becomes a problem if you total your car. Your standard auto insurance will help replace your vehicle, but it only covers the actual cash value (ACV). If your loan is upside down, you’ll still owe payments on a car you no longer own.
Gap coverage protects you in this situation by paying the difference between what you owe and your car’s ACV.
A common myth about purchasing a new car is that it loses half its value the moment you drive off the dealer lot. While the actual amount of depreciation isn’t nearly as extreme, your car will lose about 20% of its value in your first year of ownership, according to Kelley Blue Book.
Depreciation is what gap insurance protects against. For example, say you total a car you have a loan or lease on. If your insurance company decides the vehicle is worth $10,000, that’s how much you’ll receive to replace your new car.
However, if you have $15,000 left on your car loan, your lender won’t care that you no longer have the car. They still need to be paid, and you’ll be stuck with a $5,000 bill — this is where gap coverage steps in. After you pay your deductible, your gap insurance will pay the rest of your loan.
Not everyone is eligible for gap insurance. First, you’ll need collision and comprehensive auto insurance on your car. You may also need to be the first owner or leaser of the vehicle. Requirements vary by company, so check with an insurance representative to learn more. If you’re wondering “Can I find auto insurance company agents in my area?” the answer is usually yes.
Gap Insurance on an Auto Loan
Although you can buy gap coverage as an add-on to your car insurance policy, many dealers and lenders include it when you purchase your vehicle.
If you get gap coverage this way, the price is included in your monthly car payment. But, while convenient, it’s not as affordable — you’ll pay interest on the gap coverage along with everything else in your loan.
Not all dealerships offer gap insurance, so it’s a good idea to ask when you buy a new car.
Leased vehicles depreciate at the same rate as any other car, which means it’s not difficult to owe more than it’s worth after an accident. Due to this financial risk, you should consider getting gap coverage for the first part of your lease.
Like car loans, many dealerships build gap coverage directly into the lease. However, you’ll pay less overall if you elect to get gap coverage through your insurance company instead.
What Gap Insurance Doesn’t Cover
While it’s a valuable tool, there are times when gap insurance does not pay, including:
- Overdue payments or late fees on your lease or loan
- Auto insurance deductibles
- Penalties on your lease for excessive mileage
- Security deposits
- A down payment for a new vehicle
- Extended warranties
- Carry-over balances from previous leases or loans
Although it doesn’t cover every expense related to a car loan or lease, gap coverage can save you from having to pay the rest of your loan or lease if you total your car.
Read our guide if you want to know more about leasing with auto insurance.
How to Know Whether You Have Gap Insurance Coverage
Finding out if you have gap coverage is a simple task, and there are two places you can check.
First, check your car insurance policy. You’ll probably be able to find out online by looking at your policy, but you can always call an insurance representative to check for you. Read more about how to manage your auto insurance policy.
You can also read the terms of your car insurance loan or lease to see if gap coverage is included. If looking through paperwork doesn’t sound appealing, you can call the dealership you bought or leased your car from.
Deciding Whether Guaranteed Auto Protection Insurance Is Worth it
While gap coverage can save you a lot of money if you total a brand-new car, it isn’t necessary for everyone. You won’t need it if you own your car outright or have paid your loan down below the value of your vehicle.
You’ll benefit from gap coverage if you:
- Chose to finance for 60 months or longer
- Put less than 20% for a down payment
- Have a lease on your car
- Bought a vehicle that depreciates faster than average
- Rolled over negative equity from an old car loan
How do insurance companies value totaled cars? They usually use a variety of calculations.
Gap coverage can protect you from the financial burden of paying whatever is left on your loan if you total your car. However, gap coverage isn’t always a good purchase, particularly if you:
- Will pay your loan off in less than five years
- Put more than 20% down
- Bought a car that depreciates slower than the average vehicle
If you’re not sure if gap insurance is right for you, you can always speak with an insurance representative. They’ll be able to help you decide how much coverage you need.
Gap Insurance vs. Full Coverage
Gap coverage is not the same as full coverage. As you saw above, the coverage gap insurance offers is limited.
Full coverage includes the following policies:
- Liability auto insurance
- Comprehensive auto insurance
- Collision auto insurance
- Unisured motorist coverage
- Medical payments coverage
- Personal injury protection auto insurance.
You’ll probably need full coverage if you have a car loan or lease. While full coverage auto insurance protects your car from most of what life can throw at it, it won’t help you pay off your auto loan. That’s why we recommend you to buy gap coverage until you pay down your loan.
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Cost of Gap Insurance
Although gap coverage can save you thousands of dollars, it’s usually very affordable. Most gap insurance policies cost as little as $20 a year. However, insurance companies charge different amounts for their coverage options and types of auto insurance.
Your second option for gap insurance is with the dealership you buy or lease your car from. You’ll pay much more for gap insurance if you choose this option, as dealerships usually charge a flat fee of $500-$700.
When you buy gap coverage from a dealership, it lasts as long as the loan. If you get gap coverage from an insurance company, it lasts until you cancel it. You typically only need gap coverage for the first year or two of your loan. Once you’ve paid the loan down to the point where your car’s ACV is more than what you owe, you can cancel your gap coverage.
The Best Gap Auto Insurance Providers
While gap coverage is affordable and valuable protection, not all insurance companies offer it. If buying gap coverage from an insurance company sounds appealing, consider the following options and read the following reviews on them:
- Allstate Auto Insurance
- American Family Auto Insurance
- Auto-Owners Auto Insurance
- Erie Auto Insurance
- Liberty Mutual Auto Insurance
- Nationwide Auto Insurance
- Travelers Auto Insurance
You might notice some big names missing from this list — companies like Geico and Farmers auto insurance don’t offer gap coverage, while others offer similar products that aren’t quite the same.
For example, State Farm offers Payoff Protector, and USAA has Total Loss Protection, but only for auto insurance policyholders who get a car loan through those companies. Progressive offers loan/lease payoff protection, which is similar to gap coverage.
Read more:
Keep in mind that you usually can’t buy gap protection as a stand-alone policy. If you’re interested in gap insurance, but your company doesn’t sell it, you might have to look for alternative insurance companies that offer gap coverage.
How Companies Decided to Total a Car
A key component in your gap coverage is that your car needs to be declared a total loss. A vehicle is considered totaled when the price of repairing it crosses a threshold compared to its value. While every company differs, a car is declared totaled when repair costs reach 75%-90% of its value. However, companies must stay within state laws before declaring a car totaled.
When a vehicle is declared totaled, its original clean title is replaced with a salvage title. Car insurance companies often sell vehicles with a salvage title to recoup some of their losses. If a salvage car is repaired and passes state inspection, it will be issued a rebuilt title. Vehicles with a rebuilt title can be resold, driven, and insured.
Read more: Rebuilt Title Auto Insurance
No matter how well a rebuilt title car is repaired, however, you won’t be able to buy gap insurance for it.
How Depreciation Affects Gap Insurance
With the exception of some classic cars, vehicles lose some of their value every year. The first five years see the highest loss of value, and then depreciation tends to slow.
The amount of time you need to pay for gap insurance depends on how quickly your car depreciates — if your vehicle loses value quickly, you should keep gap coverage longer.
You might notice that many cars that lose value the quickest are luxury cars with hefty price tags. Luxury cars depreciate faster because people buying them often trade them back after a few years for a newer model. Drivers looking for a used car don’t usually want to pay for the higher cost of an outdated luxury car. The best auto insurance for luxury cars is also expensive.
Many cars with the slowest depreciation are popular no matter what year. For example, Jeep Wranglers and Chevrolet Corvettes are the top choices for both new and used vehicles.
No matter how quickly your car depreciates, car loan insurance can keep you safe in case you total your car. However, you should carefully monitor your car’s value compared to your loan so you can cancel as soon as possible.
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Alternatives to Gap Insurance
Although gap insurance offers excellent protection, it’s not the only thing that can help people with a loan or lease. If you’re trying to decide which coverage is best for you, consider the following options:
- Replacement value insurance: Also called new car replacement, this optional insurance pays for a replacement car of the same make and model instead of your vehicle’s ACV.
- Loan-lease coverage: Loan-lease and gap coverage are similar, but loan-lease insurance covers a broader range of cars. You can purchase loan-lease insurance anytime, and used vehicles are eligible for coverage.
- Better car replacement coverage: Some insurance companies sell an add-on that will replace your totaled car with a newer model. This add-on usually has mileage limitations. You can find usage-based auto insurance if you have mileage limitations.
If you’re interested in protecting yourself from paying an upside-down loan after totaling your car, an insurance representative can help you decide which option is right for you.
Read more: Replacement Cost vs. Actual Cash Value: Car Insurance
Find the Best Guaranteed Auto Protection Insurance for Your Car
Buying a new car should be a time of excitement, but that can quickly turn into a nightmare if you have the misfortune of totaling your vehicle. To get back behind the wheel of a new car as soon as possible, you should consider gap coverage to help pay off your loan.
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While you can buy it from a dealership, you’ll pay less for gap coverage from an insurance company. Start comparing auto insurance rates online with as many companies as possible to find the best gap coverage for your car. Getting an instant auto insurance comparison online is quick and easy. Enter your ZIP code below to compare gap insurance quotes for free.
Frequently Asked Questions
What does gap insurance mean?
Gap stands for guaranteed asset protection, which helps pay off the remainder of your car loan if you total your vehicle.
Can I purchase gap insurance by itself?
You can get stand-alone gap insurance from some dealerships and lenders when you buy a new car. However, you’ll need to purchase gap coverage from your insurance company if you can find a stand-alone gap insurance provider.
What does gap insurance do?
Gap coverage protects you from paying the remainder of an upside-down loan. For example, if your car is declared a total loss and you owe more on your loan than the vehicle is worth, gap insurance kicks in and pays what’s left.
Should you buy gap insurance after you buy a car?
While having coverage will never hurt, it’s not needed for everyone. If you put more than 20% down on your loan, or you’ll pay your loan off in less than five years, you might be able to skip gap coverage.
How do you get gap coverage?
There are two simple ways to get gap coverage. The easiest is to ask your insurance company if it can add the coverage to your policy. Alternatively, you might be able to buy gap coverage through the dealership where you purchase or lease your car.
Can you buy gap coverage anytime?
There are restrictions on when you can buy gap coverage. Usually, you can only purchase gap if you’re the first owner of a car, and you typically need to buy it within 30 days of purchasing your vehicle.
If you’re interested in gap coverage for a used car or missed the 30-day window, consider loan-lease insurance.
Do you need gap insurance?
Whether you need gap insurance or not depends on your situation. If you owe more on your car than it’s worth, gap coverage offers valuable protection. However, you don’t need gap insurance if you don’t mind the risk of having to pay off an upside-down loan.
Are gap insurance and full coverage the same?
Gap coverage is an optional add-on you can buy for your car insurance policy and is not the same as full coverage. Full coverage refers to a car insurance policy that includes collision, liability, comprehensive, uninsured/underinsured motorist, and medical payments or personal injury protection.
Is gap insurance required for a new car?
If you’re leasing a car, you’ll likely have to have gap coverage. However, your lease will likely include gap coverage automatically. Gap coverage is not required if you’re financing a car, but it is recommended until you pay your loan down.
Can you drop gap insurance?
Unless otherwise specified in your loan or lease agreement, you can drop gap coverage from your insurance whenever you’d like. If your loan or lease includes gap coverage, you’ll probably pay for it while you make payments on your car.
Do you get money back from gap insurance?
You might receive a refund for the unused portion if you pay off your car loan early. Likewise, if you have gap coverage on your insurance policy and paid in full, you’ll probably get a refund for the portion you already paid for but didn’t use.
How do you know if you have gap insurance?
To determine if you already have gap coverage, look at your loan or lease agreement or check your insurance policy. If you’re having trouble determining if you have coverage, you can always contact an insurance or dealership representative for help.
Does gap insurance cover theft?
Gap insurance itself does not cover theft — that’s what comprehensive insurance is for. However, your insurance company will declare your car a total loss if the vehicle is stolen. At that point, gap insurance will help pay any remainder of your car loan.
How long does gap insurance last?
If you buy gap coverage through a dealership, it will last the entirety of your loan or lease. For gap coverage added to an insurance policy, you can cancel whenever you’d like. The best time to cancel gap is when the amount left on your car loan is less than your car’s ACV.
Which companies sell gap coverage?
While gap coverage is affordable and valuable protection, not all insurance companies offer it. Some companies that offer gap coverage include Allstate auto insurance, Nationwide, Liberty Mutual, and Travelers. However, availability may vary depending on your location and specific insurance company.
Free Auto Insurance Comparison
Enter your ZIP code below to view companies that have cheap auto insurance rates.
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Ty Stewart
Licensed Insurance Agent
Ty Stewart is the founder and CEO of SimpleLifeInsure.com. He started researching and studying about insurance when he got his first policy for his own family. He has been featured as an insurance expert speaker at agent conventions and in top publications. As an independent licensed insurance agent, he has helped clients nationwide to secure affordable coverage while making the process simpl...
Licensed Insurance Agent
Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.
