What is GAP?

In short, GAP is a policy that covers the difference between a vehicle's value and the finance contract pay-off amount at the time of a total lose being declared on the vehicle.

What is a total loss?

Typically a total loss is when an insurance company determines that the cost to repair a vehicle is higher than the cost to replace or if a vehicle is stolen and not recovered.

Is GAP an insurance policy?

Gap is typically stated as an insurance policy; when in the event of a total loss the debt obligation remains open and the insurer of the GAP pay's on your behalf.

There is also what is known as a GAP Waiver, this is when the finance company waives your financial obligation to the portion of your loan that your insurance company has not covered in the event of a total loss.

Who's GAP should you buy?

This is usually not an option as to who's to choose when purchasing a vehicle. Dealerships usually have only 1 policy to offer. However with that being said some finance companies require their GAP when financing with them.

Now, many insurance companies do offer GAP and sometimes try and get you to purchase theirs. We do not advise you to purchase one GAP policy over the other; however we will say that you need to understand the differences between the policies;

  • Is there a cap on the amount the GAP policy will payout? If so, is your vehicles finance amount less than that value?
  • Are there any other benefits, like down payment assistance, with one policy over another?
  • Does the GAP policy cover my insurance deductible?
  • What type of vehicle insurance coverage is required by the GAP policy?

Do you need GAP?

This is a personal question. But, from a finance point of view banks and finance companies typically do not allow GAP to be written on a vehicle finance contract if the amount to finance is less than 80% of the vehicles value. This means that you had 20 to 30% down or an equivalent amount in equity in your trade in.

Even with this being said, for people who drive more miles year than the 15,000 miles a year norm, a case can be made for GAP as their vehicles will depreciated fast than normal. In this case, at your request for GAP, a dealer can contact the finance company and request an override on their amount to finance GAP policy minimum.

Learn More About Different Gap Policies.

View our present database of GAP policy contracts and brochures.

Frequently Asked Questions

Can I buy GAP after I purchased a vehicle?
No, GAP must be sold at the time of the execution of your finance contract or purchasing GAP from your insurance company it must be purchased the day you add the vehicle to your coverage.

Who offer's GAP?
GAP is offered by many Finance Companies, Insurance companies, and third party automotive companies.

Is GAP taxable?
This question is answered on a state by state basis. Please see your state of residency for further information.

Is GAP included in a lease?
GAP is typically a requirement by the lessor and not an option to accept or deny.

Can I cancel my GAP policy?
Yes. But we strongly suggest not to cancel your policy unless you have traded or sold your vehicle.

Does GAP coverage cover late payments and fees?
Typically, when a total loss is declared GAP will only cover the difference between the insurance value check and the debt owed, prior to any past due payments and/or fees. So if you are behind on your payments to your finance company GAP will typically not pay the amount you are behind.

Do I have to Finance the GAP policy?
No. The GAP policy must be stated on the finance contract, but if you wish not to finance the GAP policy amount you can just add that amount to your down payment; therefore not financing that amount.

Can I cancel my GAP policy?
Yes. But we strongly suggest not canceling your policy unless you have traded or sold your vehicle.

Can I buy the Dealership's GAP coverage if I finance through my Credit Union or Bank?
Yes, typically this is allowed in most states. However, Car Dealers usually take the path of least resistant's when it comes to outside financing. Please ask your dealer to discuss their products with you prior to visiting your bank picking up your finance check.


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