1. What Is Gap Coverage Insurance?

Gap coverage insurance (Guaranteed Asset Protection) covers the difference between what you owe on your auto loan and the actual cash value (ACV) of your vehicle if it's totaled or stolen.

2. How Does Gap Coverage Work?

The gap coverage calculation is simple:

Where:

• \( Auto Loan \) — The remaining balance on your auto loan
• \( Auto ACV \) — The actual cash value of your vehicle at time of loss

Explanation: If your vehicle is declared a total loss, standard insurance pays the ACV, while gap coverage pays the difference between that amount and your remaining loan balance.

3. Importance of Gap Coverage

Details: Gap coverage is particularly important for new vehicles that depreciate quickly, vehicles with low down payments, or long-term loans where depreciation may outpace loan payoff.

4. Using the Calculator

Tips: Enter your current auto loan balance and the estimated actual cash value of your vehicle. Both values should be in the same currency (typically USD).

5. Frequently Asked Questions (FAQ)

Q1: Who needs gap coverage?
A: Anyone who owes more on their auto loan than their vehicle's current value, particularly new car buyers and those with minimal down payments.

Q2: When is gap coverage not necessary?
A: When your loan balance is less than your vehicle's value, or if you have significant equity in your vehicle.

Q3: How much does gap coverage typically cost?
A: Usually $20-$40 per year when added to your auto insurance policy, or a one-time fee of $500-$700 if purchased through a dealership.

Q4: Does gap coverage cover my deductible?
A: Some policies do, but others don't. Check your specific policy details to understand what's covered.

Q5: Is gap coverage worth it for leased vehicles?
A: Yes, gap coverage is often required for leased vehicles and is highly recommended as lessees are typically responsible for the gap amount.