Guaranteed Asset Protection (GAP) for Autos

Gap insurance makes up the difference between what a person owes on a vehicle and that vehicle’s actual cash value if there’s an accident and the car is declared a total loss. Check if your lease includes gap coverage.

What is Auto Gap Insurance good for?

Gap insurance pays the difference between the value of a car when it’s totaled or stolen and the balance of its loan or lease. Though it may seem to refer to that difference, “gap” actually stands for “guaranteed asset protection.”

Typically, you’ll need to buy collision and comprehensive coverage to purchase gap insurance.

You’ll usually want to buy gap insurance within three years of buying a new car at a minimum. Although insurers guidelines vary, a company may require one or both of the following:

  • Your car is no more than two to three years old.
  • You are the original owner of the vehicle.

Once your car is no longer new, gap coverage usually expires. Some companies may require you to call and remove it.

Who is Auto Gap Insurance for?

You don't necessarily need GAP insurance -- certainly not for older vehicles or any vehicle you've already paid for in full. Most buyers, particularly those who have already made a significant down payment, will always be "right-side-up" -- instead of "upside-down" -- on their vehicle loan and therefore won't benefit from GAP insurance.

But there are times when it can prove to be a wise investment -- particularly if you're buying a new car or truck and have only put up a minimal down payment, say, less than 20%. Under those circumstances, GAP insurance is relatively inexpensive and can prove to be a precious asset.

As every savvy auto shopper knows, a new vehicle loses a significant amount of its value when it's purchased and driven off the dealer's lot. Most vehicles depreciate between 20% and 25% within the first two years of purchase, while higher-end cars and trucks depreciate even faster.

According to Edmunds, the rule of thumb dictates that the average new vehicle depreciates by a minimum of 11% when it's sold and is worth at least 20% less one year later.

What does that mean? Say, for instance, that you buy or lease a new vehicle and accidentally drive it into a wall 20 minutes later, causing the car to be written off. Your insurer will cover you for the value of your car at the time of the accident. If you paid $100K for the vehicle -- and it's already lost 11% of its value by sheer virtue of your having purchased it -- that's a full $11K you'll be out. Meanwhile, you'll only have $89k to find another vehicle.

Why would I need Auto Gap Insurance?

The minute you drive off the lot, a new vehicle loses some value — around 20% to 30% total in the first year. After that, the car’s value will continue to decline. If your car is totaled or stolen, standard auto insurance will only pay for the value of the car at the time of the incident. That means you’re responsible for paying the difference between the car’s current value and the amount of your car loan.

This is where gap insurance can come in handy.

What does Auto Gap Insurance cover?

Gap insurance supplements the payout you get from comprehensive or collision coverage if your car is totaled or stolen. Some gap insurance plans also cover your insurance deductible. That’s the amount subtracted from the payment for a comprehensive or collision claim.

Comprehensive and collision insurance only pay what a car is worth — its cash value — at the time of a theft or accident. When you owe more on your car loan or lease than that, gap insurance comes to the rescue.

For example, let’s say you lease or buy a new vehicle with a car loan and your car is totaled in the first year. Your collision insurance pays $15,000, the value of the car at the time, minus the deductible. If you still owed $20,000 on your loan, gap insurance would pay the remaining $5,000.

What does Auto Gap Insurance not cover?

Gap insurance does not cover:

  • car payments in case of financial hardship, job loss, disability or death
  • repairs to your vehicle
  • the value of your car or balance of a loan if your car is repossessed
  • a rental car while your vehicle is in the shop
  • a down payment for a new car
  • carry-over balances on any loans you rolled over into your new car loan

What does Auto Gap cost?

Your cost depends on individual factors like your car’s value and the duration of the lease or loan. You’ll also need to buy comprehensive and collision coverage. To find the best company for you, compare car insurance rates with at least three insurers.

For a $50,000 car on a 5-year purchase, expect an average of $450 / year for gap insurance.

Why buy your Auto Gap insurance from InsureCert?


We’ve made it easier than ever before to complete the purchase and get coverage. How easy? We don’t even need to see equity ownership or financial statements from you.

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As a digital company, InsureCert passes the savings for unnecessary administration on to you—for the most competitive price you’ll find anywhere.

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Protect your startup with the broadest coverage in the industry. You can tailor policies to your needs by choosing your own limit and deductible.

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We provide you with expert answers no matter your question: Reach us 24/7 via phone, email or live chat. You even get a personal account manager to look after you and your insurance needs.

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Still wondering about Auto Gap Insurance?

Here are some real world examples of claims:

The best way to see the benefits of a GAP Insurance policy is by looking at some real-life claim example:

Example 1 – Purchase Price Protection

Date of Purchase October 2021

Purchase Price $51,599

Date of Total Loss May 2024

Total Loss Valuation $28,250

GAP Claim Payment $23,349

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