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What is GAP insurance and what should I check?

Written by RD Matharu, Founder of ASK RD · Published

GAP — guaranteed asset protection — is an optional product that covers the difference between what you still owe on your loan or lease and what your insurer pays if the vehicle is stolen or totalled.

It matters most when you finance more than the vehicle is worth: little money down, a long term, or negative equity rolled in. The product is optional, and it can usually be bought from your own insurer as well as from the dealership.

What to look for

  • The price of the coverage as its own line, not folded into a package.
  • Whether it covers rolled-in negative equity, and up to what limit.
  • Whether your deductible is covered.
  • The term of the coverage compared with the term of your loan.
  • The cancellation and refund terms if you pay the loan off early.

Questions to ask

  • What does this GAP product cost, separately?
  • Is it required by the lender, or optional?
  • Does it cover the negative equity in this loan?
  • What is refundable if I pay off or trade early?
  • Can I buy comparable coverage from my own insurer?

When ASK RD can help

ASK RD identifies GAP and other coverage products on your paperwork, shows what they add to the amount financed, and gives you the questions to ask. Whether the coverage is worth it depends on your own situation.

Common mistakes

  • Buying GAP without knowing its price as a separate line.
  • Assuming GAP covers rolled-in negative equity when it may be capped.
  • Forgetting to request a refund of unused coverage after an early payoff.

Frequently asked questions

Is GAP insurance required?

It is generally optional, though a lender or lessor may require it in some circumstances. Ask which applies to your contract.

Can I cancel GAP later?

Many GAP products are cancellable with a pro-rated refund. Read the cancellation terms on your own contract.

Have a deal in front of you? ASK RD can help you analyze the numbers and identify questions to ask before you sign.

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ASK RD is AI-powered deal analysis and guidance. Prefer hands-on help through a purchase? See ASK RD Concierge, our optional human assistance. ASK RD is not a dealership, lender, law firm or a substitute for legal, tax or financial advice.

Keep reading

What is negative equity on a car?How should I compare car financing offers?What are dealer add-ons?How do I calculate the real price of a car?

More on the ASK RD car buying guide and in Stump the Dealer deal breakdowns.