Can I Purchase GAP Insurance by Itself?

Guaranteed Asset Protection, or GAP insurance, provides a financial safeguard for vehicle owners. Its primary purpose is to cover the difference between a vehicle’s actual cash value (ACV) and the outstanding balance of a loan or lease, should the vehicle be declared a total loss due to theft or an accident. This “gap” commonly arises because vehicles depreciate rapidly, especially new ones, often losing a significant portion of their value as soon as they are driven off the lot. When a standard auto insurance policy pays out only the vehicle’s depreciated ACV, the owner can be left owing thousands of dollars on a vehicle they no longer possess.

Purchasing GAP Insurance Separately

It is possible to purchase GAP insurance independently. Consumers often explore this option, such as after declining coverage at the point of sale. Dealerships often offer GAP insurance, but it can be bundled into the vehicle loan, potentially leading to additional interest charges over the loan term.

Another common scenario involves refinancing a vehicle, where the original GAP policy might be tied to the initial loan. Consumers also seek independent coverage if dealership premiums are significantly higher. Independent providers, including auto insurance companies and specialized firms, often offer more competitive rates. However, certain conditions and eligibility criteria apply.

Key Factors for Standalone Coverage

Independent GAP insurance providers impose specific eligibility criteria. Vehicle age and mileage are common limitations. Many policies require the vehicle to be relatively new, often under two to three model years old, or have mileage below 15,000 miles. Some providers might extend coverage for vehicles up to seven years old, depending on their specific terms.

The loan-to-value (LTV) ratio, which compares the amount owed on the vehicle loan to its actual cash value, is another factor. Providers often restrict how “upside down” a loan can be, meaning the loan balance significantly exceeds the vehicle’s value. Policies may specify a maximum LTV, such as 115% or 125%. The original loan term can also be a consideration, with some policies limiting eligibility to loans not exceeding 60 or 84 months. Independent GAP coverage requires the vehicle to have active comprehensive and collision coverage from a primary auto insurance policy, as it supplements these protections.

Acquiring Independent GAP Coverage

Acquiring independent GAP coverage involves practical steps. Consumers can find GAP policies through several sources. Many established auto insurance companies offer GAP coverage as an add-on to existing comprehensive and collision policies. This is often a cost-effective option, as it can be integrated into current premiums without incurring additional interest charges, unlike some dealership offerings.

Specialized GAP insurance providers also exist, focusing solely on this type of coverage. Credit unions often offer competitive GAP insurance rates to their members, serving as a valuable resource. To obtain a quote and purchase a policy, individuals need to provide key details. These include the Vehicle Identification Number (VIN), specific loan information (original amount, current balance, interest rate, remaining term), and the vehicle’s make, model, year, and current odometer reading. The process involves comparing quotes, reviewing terms and conditions, and finalizing the purchase of the policy that best fits the financial situation.