Gap Insurance stands for Guaranteed Asset Protection insurance and is an added feature of car insurance that helps cover the "gap" between the financed amount the driver owes on their car and the car's actual cash value (ACV) if the car is involved in a covered accident and declared damaged beyond repair. Gap insurance is not required by insurers or state law, but may be useful for some drivers.
Gap insurance is right for drivers who:
- ›Put down a small or no down payment on a new vehicle
- ›Have a car loan that requires gap insurance
- ›Have a lease that requires gap insurance
- ›Owe more on their car loan than the car is worth
- ›Drive more than 15,000 miles per year, since high mileage depreciates the car faster
Gap insurance is typically bought through an auto insurer as an added feature, from the dealership or lender where the car was bought, or through a company that only sells gap insurance.
Gap insurance is not necessary in the event of a total loss if your vehicle is worth more than the loan, if you can continue your loan payments or pay off the loan, if you do not need to replace your vehicle, or if your loan is short (12 months or less).
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