Glossary

Gap insurance

Pays the difference between a totaled car's actual cash value and the larger balance still owed on its loan or lease.

Also called: GAP, guaranteed asset protection, gap coverage

Gap insurance, short for guaranteed asset protection, covers the "gap" that opens when a car is worth less than you owe on it. If the car is totaled, or stolen and not recovered, a standard policy pays only its actual cash value. If your loan or lease balance is higher, gap pays the difference so you are not left making payments on a car you no longer have.

Example: you owe $28,000 and the car's actual cash value is $23,000. With a $500 deductible, your insurer pays $22,500 to the lender, leaving $5,500 owed. Gap pays the $5,000 difference between value and balance, and some versions also cover the deductible. Gap often does not cover overdue payments, late fees, extended warranties rolled into the loan or negative equity carried over from a previous car.

You can buy gap from an auto insurer, usually as an add-on that requires collision and comprehensive, or from a dealer or lender as part of financing. Many leases include it. loan/lease payoff coverage coverage is similar but typically pays only up to a percentage of the car's value. Gap matters most with a small down payment, a long loan or a fast-depreciating car; drop it once you owe less than the car is worth. The gap insurance calculator shows your exposure.

Last reviewed October 4, 2026

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Related terms

Loan/lease payoff coverage Optional coverage that pays part of what you still owe on a financed or leased car if it is totaled or stolen and the payout falls short of the loan. Actual cash value What a car was worth just before a loss — replacement cost minus depreciation — and the basis of most total-loss payouts. Total loss A car so badly damaged that repairs would cost more than it is worth, or more than a state threshold, so the insurer pays its value instead. Depreciation The loss in a car's value over time from age, mileage and wear, which insurers account for when calculating actual cash value. Lienholder The bank, credit union or finance company with a legal claim on a financed car until the loan is paid off, usually named on the insurance policy.

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Embedded insurance: buying coverage from automakers and dealers How car insurance sold by automakers, dealers and apps at the point of sale works, who actually insures you, what data is involved, and how to compare it. EV battery damage and insurance claims When insurance pays for a damaged EV battery and when the warranty does, why minor pack damage can total a car, and what to do after a crash, flood or fire. Gap insurance explained Gap insurance pays the difference between your car's value and what you owe if it's totaled or stolen. Who needs it, where to buy it, what it skips. Check insurance costs before you buy a car How to price insurance on the cars you are considering before you sign, what information to have, which data to check and how to compare the total monthly cost. Insurance requirements for a financed car Why lenders require collision and comprehensive, how the lienholder is listed, what force-placed insurance costs, and what changes after payoff. Insuring a leased car What leasing companies require (collision, comprehensive, higher liability limits, gap), how the lessor is listed, and what happens in a total loss.

Related insurers

Amica The oldest U.S. mutual auto insurer, a policyholder-owned direct writer from Rhode Island that tops J.D. Power's New England satisfaction rankings. AAA (The Auto Club Group) The AAA club group behind AAA car insurance in Michigan, Florida, the Upper Midwest and the Carolinas, sold only to AAA members. Cincinnati Insurance An Ohio insurer founded by four agents in 1950 that sells home-and-auto accounts only through independent agencies in 45 states, with an A+ AM Best rating. Liberty Mutual Boston-based mutual holding company selling auto direct, through its own agents and through independent agents; it retired the Safeco brand in April 2026. N&D Union Mutual Insurance Group Two affiliated New England mutuals: Norfolk & Dedham, selling auto insurance in Massachusetts, and Union Mutual, selling it in Vermont, New Hampshire and Maine. Tesla Insurance Tesla's in-house auto insurance, sold in the Tesla app in 15 states and priced monthly from each car's Safety Score outside California.

Related tools

How much car insurance do I need? A starting point for your limits and options, from liability to gap and rental, built from common rules of thumb and your state's minimums. Gap insurance calculator Chart your loan balance against the car's falling value to see how long you would owe more than it is worth — the window gap insurance covers. Total loss payout estimator Estimate a total-loss settlement, what goes to your lender, and whether you would still owe money on a totaled car.