What Is GAP Insurance?

Guaranteed asset protection (GAP) insurance can be an essential financial safeguard when you buy or lease a new vehicle. GAP insurance may cover the difference between what you owe on your car loan and the car’s actual cash value (ACV) if it’s totaled or stolen. Because cars depreciate quickly, standard auto insurance may not pay enough to cover your remaining loan balance, leaving you with a potentially large out-of-pocket expense.

What Does GAP Insurance Cover?

GAP insurance is an optional coverage that may cover the shortfall between your car’s ACV and the amount you still owe on your loan or lease. For example, if your car is stolen or totaled in an accident and your auto insurance payout is $18,000 but you still owe $22,000 on your loan, gap insurance may bridge the $4,000 gap. However, it’s important to note that GAP insurance doesn’t cover repairs, routine maintenance or any deductibles on your auto policy.

When Should I Buy GAP Insurance?

GAP insurance isn’t necessary for every car owner, but there are specific situations where it may save you from significant expenses. If any of the following apply to you, this insurance might be a good addition to your auto insurance:

• You financed your car with a small downpayment

• You took out an extended loan term, such as 60 or 72 months

• Your car’s make or model is known for rapid depreciation

• You added an old car loan’s unpaid balance to your new loan

• You lease your car and your lease agreement doesn’t include gap coverage

Is This Insurance Required?

GAP insurance is not mandatory, but some lease agreements may require it. Although the policy is optional, it’s worth considering if you’re at risk of owing more on your car than it’s worth.

Learn More

Contact Latinos Services today to learn more about GAP insurance. Our team is committed to helping you find the ideal coverage.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.