What is GAP car insurance?

Free Car Insurance Comparison

 Secured with SHA-256 Encryption

Call for FREE quotes: (888) 442-5133

Tonya Sisler has a Bachelor’s Degree from the University of South Carolina in Journalism and has worked for 15+ years in management. She has also completed a proofreading certification and is currently...

Full Bio →

Written by

Brad Larson has been in the insurance industry for more than a dozen years. He started out as a claims adjuster for a national carrier. He has since switched to the agency side of the business...

Full Bio →

Reviewed byBrad Larsen
Licensed Auto Insurance Agenthttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/cheapcarins-live/daeea45a-brad-larsen.jpg

UPDATED: Mar 13, 2020

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We partner with top insurance providers. This doesn't influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

GAP insurance is a type of car insurance which provides coverage for the GAP between the book value or replacement value of a car and the amount of your auto loan or lease obligation.

Why do you need GAP insurance?

Anyone buying a late model car (especially brand new vehicles) with a minimal down payment can experience a couple years where the car is worth less than the amount owed on the car loan. The book value of a car can drop 25% or more as soon as you leave the car dealership and car insurance companies often only insure vehicles by the book value when it comes to replacement coverage.

If you buying a car this mean that the insured amount of your vehicle in a total loss accident will be far less than what you owe the car loan company during the first couple years. If a total loss happens (and you have the right type of car insurance) then a car insurance company will reimburse you for the cost of vehicle up to its book value. Any difference in the car loan balance and the book value you are personally liable for. Drivers with GAP insurance will receive additional monies to cover this GAP however drivers without this type of insurance will end up with no vehicle and a large debt. Imagine this scenario:

  • You purchase a vehicle for $40,000
  • 12 months later you suffer total loss and the vehicle is written off
  • The car insurance company offer book value replacement value of $26,000
  • Your car loan balance is $37,000

In the scenario above the difference between your car loan balance and the book value is $11,000.  Without GAP insurance you now have an $11,000 debt to the car loan company. If you purchase this insurance however your liability would be ZERO as the car insurance company would pay this difference. This is a very common event especially for first time buyers.

How much is GAP car insurance?

GAP insurance is very cheap for most drivers with an additional cost of under $20 a month for most vehicles.

What are the types of GAP auto insurance?

There are 3 types of GAP insurance including Simple GAP , GAP Waiver and GAP endorsement.

Simple GAP Insurance

Additional insurance purchased from a licensed car insurance company

GAP Waiver

Where the car loan company agrees to waive the difference (GAP) between your car loan balance and the insurance company replacement check in return for a small increase to your auto loan payments

GAP Endorsement

An amendment to your current auto insurance policy adding this type of coverage.

Anyone financing a late model vehicle should consider adding GAP insurance but even some older cars can benefit from this type of car insurance.

Compare Car Insurance Rates Today!

Start Saving on Car Insurance!

Enter your zip code below to compare rates from the top companies in your area

 Secured with SHA-256 Encryption