What is Gap Insurance and Why You Should Have It
By Shanelle Clarke, Esq.
Guaranteed Asset Protection (GAP) insurance is an added protection for auto owners who are financing or leasing a vehicle. GAP insurance is not another way for insurance companies to “get you”. GAP insurance is used when an accident occurs, the vehicle is totaled and the insurance company pays the actual cash value of the car, not what is owed on the loan. The vehicle must be considered a total loss from an accident or theft without being recovered in order for GAP insurance to work. Without GAP insurance, the auto owner has to pay the balance that is owed on the loan or lease out of pocket, after the insurance company pays the actual cash value of the vehicle at the time of loss. GAP insurance is an added protection onto your auto insurance policy. This is a good way to protect a depreciating asset that you have invested a lot in.