Guaranteed Asset Protection
Guaranteed Asset Protection (GAP) protects you against financial loss in the event your vehicle is damaged beyond repair (totaled) or stolen and never recovered.
What is GAP insurance?
Since a vehicle’s value declines as a result of depreciation, the loan balance can be higher than its actual cash value. Without GAP coverage, you would be responsible for paying the difference between the insurance settlement and the outstanding loan balance. With the purchase of GAP, the deficiency balance may be waived.
Do I need GAP insurance?
It depends on the amount of your loan and the purchase price of your car. For example, you purchase a vehicle for $31,000. One year later it is stolen and never recovered, or involved in an accident in which it is beyond repair. The value might have depreciated to $15,350, yet you still owe $24,281. Most insurance policies will only reimburse you for the depreciated value of the vehicle, less your deductible. Assuming your deductible was $1,000, the insurance company would pay $14,350. GAP protection would pay the $8,931 difference, meaning minimal out-of-pocket expense for you. Questions about GAP? Contact a financial service representative