GAP Insurance — What It Covers & What It Costs
Covers the difference between what you owe on your car and what it's actually worth.
Get Your Free Quote$200–$400/yr
Average Cost
4
Key Benefits
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Related Coverages
Drivers who owe more on their car than it's worth
Best For
Understanding GAP Insurance
GAP (Guaranteed Asset Protection) insurance covers the difference between your vehicle's actual cash value and the amount you still owe on your auto loan or lease if your car is totaled or stolen. Because new cars depreciate quickly — often losing 20% or more of their value in the first year — it's common for drivers to be "upside down" on their loan, owing more than the car is worth.
Without GAP insurance, if your car is totaled, your regular insurance pays the car's current market value, and you're responsible for the remaining loan balance out of pocket. GAP insurance eliminates that financial gap, and some policies even cover your insurance deductible.
GAP insurance is especially important for drivers who made a small or no down payment, have a loan term longer than 60 months, purchased a vehicle that depreciates quickly, or rolled negative equity from a previous loan into their current one.
Key Benefits
- Covers the gap between your loan balance and the car's value
- Protects against rapid depreciation on new vehicles
- Some policies also cover your insurance deductible
- Peace of mind during the early years of a car loan
Limitations to Know
- Only useful while you owe more than the car is worth
- Does not cover missed payments or late fees
- Becomes unnecessary as your loan balance decreases
- May be cheaper through your insurer than the dealership
Frequently Asked Questions
What is gap insurance?
GAP (Guaranteed Asset Protection) insurance covers the difference between your vehicle's actual cash value and the amount you still owe on your auto loan or lease if your car is totaled or stolen. Because new cars depreciate quickly — often losing 20% or more of their value in the first year — it's common for drivers to be "upside down" on their loan, owing more than the car is worth.
How much does gap insurance cost?
GAP Insurance typically costs $200–$400/yr. Your actual rate depends on factors like your driving record, location, vehicle, age, and credit score. Comparing quotes from multiple carriers is the best way to find the lowest rate.
Do I need gap insurance?
Drivers who owe more on their car than it's worth, especially with new cars and long loan terms. Covers the gap between your loan balance and the car's value. Consider your vehicle's value, your financial situation, and whether your lender or state requires this coverage.
How does gap insurance work?
Without GAP insurance, if your car is totaled, your regular insurance pays the car's current market value, and you're responsible for the remaining loan balance out of pocket. GAP insurance eliminates that financial gap, and some policies even cover your insurance deductible.
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