Guaranteed asset protection, or GAP, is a type of insurance policy that covers the difference between the amount owed on a car loan and the actual cash value of the car. Some providers also call this GAP insurance but coverage is a more accurate term. This coverage is important because it can prevent you, as the borrower, from having to pay the difference in the loan balance if your car is totaled or stolen. While GAP insurance is not required, it can be a valuable protection for car owners like yourself.
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What Does GAP Cover?
GAP is an optional loan add-on you can get when financing a car. If your car is worth less than your loan, it provides you with protection from being liable for the full amount if your car was totaled, stolen, or considered a complete loss and covered by insurance. As you can see, there are a lot of benefits included with GAP. It covers the value of your vehicle between what you owe and the insurable value. but if you’ve ever been offered this coverage by a dealership or during a refinance, your first question might be is GAP worth it? Here is a look at whether or not it is worth purchasing and how you can get it.
About Guaranteed Asset Protection
Is GAP Worth It?
To figure out if GAP is worth having, let's take a look at this example. If you finance a Ford F150 truck purchase for $32,000, you owe the lender this amount of money along with any other taxes and fees. Your monthly auto loan payments go towards paying off this amount. You are super happy with the truck and enjoy driving it everywhere!
One day you are happily driving your truck along and crash into another car — severely damaging the truck. The insurance company says it will cost more than the truck is worth to fix it and so it is a total loss. Fortunately, you have a car insurance policy with comprehensive and collision coverage which will reimburse you the actual cash value, or ACV, of the truck.
However, the ACV is lower than the $32,000 cost of your auto loan and will only pay you a lower value of around $27,500 which takes into account the pre-loss market value minus any depreciation. This is where GAP coverage comes in to help cover the remaining $4,800 you owe on the truck loan.
How to Get GAP Insurance
GAP insurance is usually offered by several parties including the dealership when you finance your vehicle, third-party lenders like during refinance, and car insurance companies. You can choose the right place to search for GAP insurance depending on how and where you took out your car loan.
When you buy a new car, the dealer will offer you several different types of insurance including GAP insurance. Remember that GAP insurance covers the difference between what you owe on your car and its actual cash value and is managed through the financing department. If your new car is totaled, GAP insurance will pay the difference between the amount you owe on your car and the amount the insurance company pays. GAP insurance is important to consider because it can protect you from owing a lot of money if your car is totaled.
Some banks, credit unions, and third-party lenders also offer GAP insurance to their customers. This can help you if you financed your car through a none-dealer route. GAP can also be added onto your refinanced car loan through the lender. Since the refinancing lender is taking over your auto loan debt, they can provide a similar coverage to the dealership in helping to cover the difference in the loan's value.
You can also see if your car insurance company offers GAP coverage options as part of their insurance offerings. It may be easy to add guaranteed asset protection onto your existing car insurance policy, so this route can be advantageous to manage your coverage in the same place. Your insurance provider may also have cut-rate discounts for adding additional policies to your plan, so ask your insurance representative.
The best way to find out if GAP insurance is right for you is to talk to your car dealer, loan officer, or an insurance agent. They can help you figure out how much coverage you need and how much it will cost.
Should You Get It?
Weighing the Pros and Cons of GAP
It is important to weigh all the pros and cons of any purchase, and this includes guaranteed asset protection, or GAP insurance. As with anything, there are both benefits and drawbacks to consider before making a decision. One of the biggest benefits of GAP insurance is that it can help you avoid a major financial setback in the event your car is totaled or stolen. GAP coverage can help you pay off the remaining balance on your car loan, which can be thousands of dollars.
However, GAP insurance can also be expensive, so it's important to weigh the cost against the potential benefits. Another thing to consider is that GAP insurance may not be available for all loan types or vehicles. Before deciding whether or not to buy GAP insurance, it's important to understand what it covers and how it might benefit you.
The Actual Cost of GAP
Depending on where you buy GAP, there may be a few fees associated with getting the coverage including a one-time fee or a monthly cost. Some providers like auto dealers charge a fee like $300 so you can opt-in for guaranteed asset protection. Other insurance-based providers charge a monthly fee like $10 a month for as long as you maintain the coverage. You can usually cancel it at any time or when you no longer need it if you have paid down your vehicle loan balance under the car's value.

GAP FAQs
Have questions about getting guaranteed asset protection for your car? Get answers, and find information.
Guaranteed asset protection is a type of insurance policy that covers the difference between the amount owed on a car loan and the actual cash value of the car.
GAP stands for guaranteed asset protection.
You can use GAP if you have to pay off the difference between your auto loan and your vehicle's value.
Yes, it can be worth buying as protection for your auto loan.