Jeffrey Wade
When buying a new car, it's easy to get caught up in the excitement of the freedom it will bring and forget about the potential risks. Guaranteed Asset Protection (GAP) coverage is an important consideration when purchasing a vehicle, as it can help protect you financially in the event of a total loss. GAP coverage helps bridge the gap between the amount owed on your vehicle and its actual worth if it is stolen or written off. While it is included with all Ally leases, it is not always included with finance companies, so it's important to understand how to add it to your auto plan.
| Characteristics | Values |
|---|---|
| What is GAP insurance? | Guaranteed Asset Protection (GAP) insurance helps protect a buyer or lessee in the case of total loss. It covers the gap between how much is owed for the vehicle and how much the car is worth if it is totaled or stolen. |
| When do I need GAP insurance? | If you are concerned about not having enough money to pay the gap amount to the lender in case of a total loss, you should consider purchasing GAP insurance. |
| Where do I get GAP insurance? | GAP coverage is included with all Ally leases but not all finance companies include GAP. You can typically include GAP coverage when you sign the lease or finance contract papers. You may also be able to get GAP through your auto insurance company, the lender that’s financing your vehicle, or an independent GAP provider. |
| How do I make a GAP claim? | To make a GAP claim, you need your last name, ZIP, and VIN. You also need to submit the required documents for processing. |
| What documents are required for a GAP claim? | Completed vehicle information form, total loss evaluation report and settlement breakdown, information regarding the cancellation of optional insurance and vehicle service contracts, outstanding balance on your account (payoff quote) as of the date of loss from your finance company, a copy of your primary insurance carrier’s declarations page, the settlement check or proof of payment from your primary insurance carrier or third-party liability carrier, the front and back of your GAP addendum, your finance agreement, your vehicle purchase agreement or buyer’s order, and a copy of your payment history from your finance company. |
| How do I cancel my GAP addendum? | To cancel your GAP addendum, call 1-800-631-5590. You can receive a full refund if you haven’t made any claims and cancel within 60 days of the start of your contract. Otherwise, your refund amount will be prorated and there may also be an administrative fee. |
What You'll Learn
What is GAP insurance?
Guaranteed Asset Protection (GAP) insurance is an optional product that covers the difference between the amount you owe on your auto loan and the amount your insurance company pays out if your car is stolen or totaled. This gap occurs because cars depreciate in value as soon as they leave the car lot, and most standard insurance policies only cover the depreciated value of the car at the time of the claim. This means that the amount of the loan may exceed the market value of the vehicle, leaving you with a gap in coverage that can result in a hefty bill.
For example, if you have an accident and your car is totaled, your insurance provider will pay you the value of the vehicle minus your deductible. However, this amount may not cover the remaining loan amount you owe. In this case, GAP insurance would cover the difference between what your vehicle is worth and what is owed on it. This type of insurance is especially important if you made a small down payment, are financing for 60 months or longer, or leased the vehicle, as these situations can increase the risk of owing more than the car is worth.
GAP insurance can be purchased from your auto insurance company, the lender financing your vehicle, or an independent GAP provider. It is typically included with all Ally leases, but not all finance companies offer this. When purchasing a vehicle, you can usually include GAP coverage when you sign the lease or finance contract. It is important to note that GAP insurance may not be necessary if you are comfortable covering an emergency situation with your own cash reserves.
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When do I need GAP insurance?
GAP insurance is a good option for drivers who owe more on their car loan than the car is worth. If you are currently making car loan payments, calculate the loan balance and weigh it against your car’s current cash value. If there is a gap, you should consider GAP insurance.
GAP insurance is also a good option for drivers whose car loan or lease agreement requires it. Some lease providers may include GAP insurance in the price of the lease.
You should also consider GAP insurance if you have made a small down payment, have a long finance period, or have purchased a vehicle that depreciates quickly.
If you are not financing or leasing your car, there is no reason to purchase GAP insurance.
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Where can I get GAP insurance?
When it comes to purchasing Guaranteed Asset Protection (GAP) insurance, you have several options. Firstly, GAP coverage is included with all Ally leases, so if you're leasing a car through Ally, you're already covered. If you're purchasing a vehicle, you can typically include GAP coverage at the time you sign the lease or finance contract papers.
You can also obtain GAP insurance through your auto insurance company, the lender financing your vehicle, or an independent GAP provider. It's worth noting that not all finance companies include GAP coverage, so be sure to review the terms of your lease or finance contract carefully.
If you decide to go with Ally, their Premier Protection suite of products offers a range of coverage options, from comprehensive to basic, and their website provides detailed brochures and customer agreements for you to review. You can also give them a call at 1-800-631-5590 to discuss your specific needs and determine the right plan for you.
Additionally, Ally provides helpful information on their website about making a GAP claim. They outline the required documentation and steps to initiate the claims process, making it as seamless as possible for their customers.
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How do I make a GAP claim?
To make a GAP claim, you must first contact your insurer and provide them with documentation that shows the car's value and its coverage details. Depending on the insurance company, you may be able to file your claim in person, over the phone, or online.
The documentation you will need to provide includes:
- A copy of your original GAP contract, which is available from your GAP insurance provider.
- The original sales agreement from the dealer, showing how much you paid for the car.
- A manufacturer's invoice or other documents showing the vehicle's original value, available from the dealership.
- The financing contract for the lease or loan, available from the dealership, bank, or credit union that holds your lease or loan.
- A complete payment history for the lease or loan, including the current outstanding balance. This is available from the dealership, bank, or credit union.
- A valuation report, available from your standard insurance company.
- A copy of the check from the insurer, covering the total loss, available from your standard insurance company.
- An insurance settlement statement, breaking down the amount on the check, available from your standard insurance company.
- A copy of the police report, detailing what happened to the car and when.
Although these documents are frequently required, every insurer is different, so it is worth checking their website for a list of requirements, or calling/emailing them to verify that you have everything you need.
Most GAP insurers will send a check within four to six weeks, usually directly to the auto lease or loan provider, if your claim is accepted. You can help to expedite the process by staying on top of any requests for additional paperwork and by following up with your insurer.
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What is the difference between GAP insurance and a vehicle service contract?
GAP insurance and vehicle service contracts (VSC) are two types of auto plans that can help cover unexpected costs. Understanding the differences between them is essential to ensuring you receive the best protection for your vehicle.
GAP insurance, or Guaranteed Asset Protection, helps protect buyers or lessees in the case of a total loss. It bridges the gap between how much is owed for the vehicle and how much the car is worth if it is totaled or stolen. This gap occurs because insurance typically pays the cash value of the vehicle at the time of the loss, and due to depreciation, the vehicle's value may be less than what is still owed on the loan.
For example, if you owe $25,000 on your car loan but your insurance carrier values the vehicle at $21,000, your insurance provider will pay you $21,000 (the value of the vehicle) minus your deductible. With GAP insurance, the remaining $5,000 on your loan would be covered.
When you purchase a new vehicle, it is typically protected by a manufacturer's warranty, which covers the cost of repairs or breakdowns caused by general wear and tear and other defects for a limited time or mileage. Once this initial coverage ends, a VSC, also known as an extended warranty, offers continued protection against unexpected and costly repairs, including vital components such as the engine and transmission.
A VSC may also include additional benefits that a manufacturer's warranty doesn't cover, such as towing, roadside assistance, rental car reimbursement, and trip interruption reimbursement. Some plans even offer routine maintenance coverage to help extend the life of your vehicle.
Key Differences:
- GAP insurance covers the difference between the amount owed on a vehicle and its depreciated value in the event of a total loss, while a VSC provides protection against the cost of repairs and breakdowns.
- GAP insurance is typically purchased when buying or leasing a new vehicle, while a VSC is often considered after the manufacturer's warranty has expired.
- GAP insurance helps protect against financial loss due to depreciation, while a VSC focuses on mechanical breakdowns and repairs.
- GAP insurance is optional coverage, while a VSC is an extended warranty that provides additional protection beyond the manufacturer's warranty.
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Frequently asked questions
Guaranteed Asset Protection (GAP) insurance helps protect a buyer or lessee in the case of a total loss. It helps bridge the gap between how much is owed for the vehicle and how much the car is worth if it is stolen or totaled.
To make a GAP claim, you will need your last name, ZIP, and VIN. You will also need to submit some documentation for the claim to be processed.
The documents required include a completed vehicle information form, the total loss evaluation report, any information regarding the cancellation of optional insurance and vehicle service contracts, your finance agreement, and your vehicle purchase agreement.
To make a GAP claim, call 1-800-631-5590.
