Gap Insurance: Protecting Your Assets

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 if your car is stolen or totaled. It is designed to cover the gap between the vehicle's value and the amount you still owe on your loan or lease. GAP insurance is intended to provide financial security and peace of mind in the event of a worst-case scenario, such as your car being declared a total loss or stolen. It is offered as a supplement to an auto, motorcycle, boat, ATV, or RV loan, and can be purchased at the time of vehicle purchase, with the fee included in the financing.

GAP covers the difference between the value of your car and the loan balance

Guaranteed Asset Protection (GAP) insurance is an optional product that covers the difference between the value of your car and the loan balance. This type of insurance is intended to protect the investment you made in your vehicle in the worst-case scenario, such as if your car is stolen or deemed a total loss by your insurance company.

GAP insurance covers the "gap" between the vehicle's value and the amount you still owe on your loan or lease. This can provide drivers with peace of mind and financial security in the event of an accident or theft. Specifically, GAP insurance is designed to cover the difference between the value of your car at the time of loss and the remaining loan or lease balance, subject to certain limitations and conditions.

For example, let's say you bought a car with a sticker price of $28,000 and made a 10% down payment, bringing your loan cost to $25,200. With a five-year auto loan and a 0% financing deal, your monthly payment is $420. After 12 months, you've paid $5,040 and still owe $20,160.

Now, suppose your car is totaled in an accident. The insurance company calculates the current value of the vehicle, taking into account depreciation. If your car has depreciated by 20%, its value is now $22,400. Your insurance company will reimburse you for the current value of the vehicle, leaving you with a gap of $2,240 between the reimbursement and the remaining loan balance. This is where GAP insurance comes in.

With GAP insurance, the $2,240 gap would be covered, and you would be left with $2,240 to put down on a replacement vehicle. However, if your car depreciated by 30% since you purchased it, the insurance reimbursement would be $19,600, leaving a gap of $560. In this case, GAP insurance would again cover the difference, ensuring you don't have to pay out of pocket.

GAP insurance is particularly important if you owe more on your car loan than the car is worth. This can happen if you didn't make a substantial down payment or if you chose a long loan term. By covering the difference between the value of your car and the loan balance, GAP insurance helps to protect you from financial loss in the event of a total loss or theft of your vehicle.

GAP is optional and supplements auto, motorcycle, boat, ATV, or RV loans

Guaranteed Asset Protection (GAP) insurance is an optional product that supplements auto, motorcycle, boat, ATV, or RV loans. It is designed to protect the policyholder from financial loss in the event of their vehicle being stolen or written off.

GAP insurance is intended to cover the difference between the amount owed on a loan and the amount paid out by standard insurance policies. This is because standard auto insurance policies will only pay out up to the value of the vehicle, which may be less than the amount owed on the loan. GAP insurance is, therefore, a way to protect oneself from negative equity—when you owe more than your vehicle is worth.

GAP insurance can be purchased for automobiles, trucks, all-terrain vehicles, travel trailers, and motor homes. It can also be purchased for boats, personal watercraft, and snowmobiles. GAP insurance is generally only purchased for new vehicles and is not usually kept for the duration of the loan. This is because, over time, the value of a car decreases, while the amount of the loan decreases too. After a few years, the car is normally worth more than the loan, so GAP insurance is no longer necessary.

GAP insurance is relatively inexpensive and can often be purchased from a dealer or lender when buying a vehicle. However, it can also be purchased later on and is often available from vehicle insurance carriers, who may offer GAP coverage at a lower cost with fewer restrictions. It is important to compare prices and coverage before purchasing GAP insurance.

GAP covers up to $50,000 of the gap between the insurance settlement and loan balance

Guaranteed Asset Protection (GAP) insurance is an optional type of car insurance that covers the difference between the amount you owe on your auto loan and the amount your insurance company pays if your car is stolen or deemed a total loss. This type of insurance is especially useful if you've made a small down payment on your vehicle, you have a long-term loan (more than four years), or you have a car that depreciates in value quickly.

GAP insurance is not required by state law, but it may be required by lenders and lessors. It is also important to note that you must have comprehensive and collision insurance in order to buy GAP coverage.

The cost of GAP insurance can vary, but it typically ranges from $20 to $40 per year when added to a car insurance policy. When purchased from a dealership, GAP insurance can cost between $400 and $700.

In terms of coverage, GAP insurance can provide up to $50,000 of protection to cover the gap between the insurance settlement and the loan balance. This means that if you owe more on your car loan than the insurance company pays out after a total loss, GAP insurance can cover the difference up to $50,000. For example, if you owe $25,000 on your loan and your car is only worth $20,000, GAP insurance can cover the $5,000 gap, minus any deductible you may have.

Overall, GAP insurance can provide valuable financial protection and peace of mind for drivers who are concerned about the potential gap between their car's value and their loan balance in the event of a total loss or theft.

GAP covers your insurance deductible

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 if your car is stolen or totaled. This type of insurance is designed to cover the "gap" between the vehicle's value and the amount you still owe on your loan or lease.

While GAP insurance is optional, it can provide valuable financial protection in the event of a total loss or theft of your vehicle. It is worth considering if you owe more on your loan than the current value of your vehicle or if you don't have enough savings to cover the difference.

Now, let's focus on how GAP covers your insurance deductible. When your vehicle is stolen or totaled, your insurance company will pay out the value of your vehicle at the time of the incident, minus your insurance deductible. This payout may not be enough to cover the remaining loan balance. This is where GAP insurance comes in. GAP insurance covers the difference between the payout and the remaining loan balance, including your deductible.

For example, let's say you have a car loan with an outstanding balance of $15,000. Your car is then totaled in an accident, and your insurance company determines the value of your vehicle at the time of the incident to be $11,000. If you have a deductible of $1,000, the total payout from your insurance company would be $10,000. Without GAP insurance, you would be left with a remaining balance of $5,000 to pay off. However, with GAP insurance, the difference is covered, and you would owe nothing.

It's important to note that GAP insurance must be purchased at the same time as your car, and you must be the car's first owner. Additionally, GAP insurance doesn't cover your deductible directly. Instead, it covers the "gap" between the insurance payout and the remaining loan balance, which includes your deductible.

In summary, while GAP insurance doesn't explicitly cover your deductible, it ensures that you don't have to pay any remaining balance on your loan, including your deductible, in the event of a total loss or theft of your vehicle.

GAP is refundable within the first 60 days

Guaranteed Asset Protection (GAP) insurance is an optional product that covers the difference between the amount owed on an auto loan and the amount paid by the insurance company in the event that the car is stolen or totaled. GAP insurance is intended to cover the loss suffered if the loan balance is higher than the value of the vehicle.

GAP insurance is fully refundable within the first 60 days of the policy. If you decide to cancel your GAP insurance policy within this time frame, you can expect to receive a refund for the remaining coverage. This is because GAP insurance is typically paid as a lump sum or in monthly payments, and cancelling early prevents overpayment. After 60 days, the possibility of a refund depends on the terms of your contract or policy.

To receive a refund for your GAP insurance, you must cancel your policy and request a refund from your insurance company for any unused portion of the coverage. This can be done for multiple reasons, including:

• No longer wanting or needing GAP insurance
• Changing GAP insurance companies
• Paying off your auto loan or reducing the balance below the car's value
• Selling or trading in your vehicle

It's important to note that if your GAP insurance policy has expired or if there is a deadline for requesting a refund stated in your policy, you may not be eligible for a refund. Additionally, you may need to provide certain information and documents to your insurance company, such as proof of the sale or trade of your vehicle and verification of its mileage.

When requesting a refund, it's recommended to have a new GAP insurance policy in place to ensure there is no lapse in coverage for your vehicle. The typical GAP insurance refund payout time is within 30 days, but this can vary depending on the company and state regulations.

Frequently asked questions