Guaranteed Asset Protection Insurance

Updated: 29 February 2024

What Does Guaranteed Asset Protection Insurance Mean?

Guaranteed Asset Protection (GAP) Insurance is insurance that provides coverage for the difference between the actual cash value of the car and the amount owed on the loan. Thus, if you have a loan on a car and the car is stolen or declared a total loss after a collision, fire or any covered peril, the insurer will pay the actual cash value of the vehicle. In some circumstances, the amount owed on the loan might be more than the actual cash value — this difference is what is insured by gap insurance.

GAP insurance is also known as guaranteed auto protection (GAP).

Insuranceopedia Explains Guaranteed Asset Protection Insurance

Certain circumstances make obtaining gap insurance a good idea, particularly when it comes to new vehicles. New cars depreciate rapidly, and long term loans with low down payments are more common than in years gone by. If you make a low down payment and have a loan that runs for 60 months or more, for the first few years you own the vehicle you will have paid off only a small fraction of its value, and will still owe a lot on the loan. But, in those same first few years the car will depreciate a lot, and it’s actual cash value will be less than what you owe on the loan.

In general, if you pay less than 20% down, finance the vehicle for 60 months or more, or roll over a loan (add it to the amount owed on the loan for the new car) from a trade-in vehicle when you buy the car, gap insurance might be appropriate. If you lease a vehicle, gap insurance is often mandatory. In some states dealers must offer you gap insurance, but in any state you can obtain it from independent brokers.


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