What Is GAP Insurance?

And what does it cover?

Capital One | 
Oct 13, 2021 | 1 min read

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In the event that your car is totaled or stolen, Guaranteed Asset Protection (or “GAP”) is intended to protect you if the remaining balance on your account is larger than the insurance proceeds received for the car.

Your regular car insurance usually covers the fair market value of the car, not the amount you still owe on your loan. It is common for you to owe more than the car is worth at the beginning of a loan. If this is your case at the time of total loss, GAP helps cover the difference between the amount paid by your insurer and your remaining loan balance.

Bear in mind that GAP will not cover missed payments or interest that has accrued on late payments. As with extended warranties and prepaid maintenance plans, find out exactly what your GAP will and won’t cover before you make a decision.

In other cases, the lender will require GAP insurance in the financing of a car. You may want to inquire about the lender’s standard before you get to the signing table. If it is not optional in your negotiation, also consider the pros this extra benefit can provide as you consider whether to go through with the car’s purchase.

GAP can make sense if:

  • You buy it at the right price
  • You’re taking out a loan that is greater than the value of your vehicle
  • If you don’t have enough savings to cover the difference between the fair market value of your vehicle and the remaining loan balance in the event of a total loss.

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Banking should leave you with the same great feeling you get when you drive casually on a weekend afternoon. And that’s how I feel when writing helpful tips and reviews – passionate about cars and passionate about financing and everything in between when buying a new ride.


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