What Is GAP Insurance, and What Does it Cover?

Get Car Financing
Even with poor credit.

By

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


, - August 26, 2019

If you totaled your car and still have a balance on an auto loan, GAP insurance can help you pay the entire loan off. Guaranteed asset protection insurance, or GAP insurance, is coverage the bridges the difference between the loan balance and the vehicle’s actual cash value. It helps protect you in the event you don’t have equity and your car is totaled or stolen. GAP insurance isn’t required, but, in many cases, we highly recommend buying it.

How GAP Insurance Helps

When you finance a vehicle, full coverage insurance is required, but full coverage doesn’t always cover the loan balance in the event the car is totaled or stolen. In fact, collision and theft insurance only covers the vehicle’s actual cash value, minus any deductible, and this is where purchasing GAP insurance can really help.

Not everybody needs to have GAP insurance, but it can help you save money depending on your situation. Unsure about whether or not you need it? Check out some common examples of how GAP insurance could come in handy:

  1. You made a small down payment which ended up being less than the initial depreciation of the car.
  2. You chose a long-term loan to save money on your monthly payment.
  3. You rolled over previous negative equity into your new loan.
  4. Your vehicle has excessive wear and tear or high mileage.

Each of these situations can cause negative equity. Negative equity is when you owe more on your loan than the car’s actual cash value, and most people end up being upside down on their loan at some point. Having GAP insurance covers the difference if you’re upside down at the time of the incident.

Where to Get GAP Insurance

Most of the time, you can purchase GAP insurance through your auto insurance company, but you can also buy it through a dealership or third-party insurer. Either way, you have options, although it’s a good idea to buy it right away. No matter when or where you decide to purchase GAP insurance, you should rate shop and compare costs to get the best deal.

Also, keep in mind that if you purchase GAP insurance when you buy your vehicle, the dealer may be able to roll the cost into your loan. This means you’re going to pay interest charges on it and it may be a hassle to remove if you decide you no longer want it.

Ready to Start the Financing Journey?

Don’t put yourself in a worse financial situation – make sure you have the coverage you need for your car. GAP insurance isn’t for everyone, but make sure you know what it does and where you can purchase it in case you decide it's for you.

Once you feel confident in the type of insurance coverage you need, you can start the financing journey with us. At CarsDirect, we work with special finance dealerships all across the country that are teamed up with the lenders you need.

To get started today, simply fill out our online auto loan request form. Our process is fast, easy, free, and puts you under no obligation.

Need a Car Loan?

It only takes a minute.

Megan Foukes is a recent graduate from Indiana University who graduated with a bachelor’s in journalism. Megan works as a content writer for Auto Credit Express and contributes to several automotive and finance blogs.


Search New Cars by Loan Payment »

View estimated loan payments based on local rebates and financing offers.

Loan approval is not guaranteed and is subject to credit application and approval of the lender. Individual loan terms may vary. Use of this website constitutes acceptance of CarsDirect.com's Terms of Use, Disclaimer, Privacy Policy, and Cookie Policy.

Privacy Policy|Terms of Use|Cookie Policy|Disclaimer
COPYRIGHT 1999-2019 MH Sub I, LLC dba CarsDirect.com