Where to Buy GAP Insurance Only and What You’ll Need

Guaranteed Asset Protection (GAP) insurance is a product designed to cover the financial “gap” that can arise between a vehicle’s actual cash value (ACV) and the outstanding balance on its loan or lease. When a vehicle is declared a total loss due to an accident or theft, a standard auto insurance policy typically pays out the vehicle’s ACV at the time of the incident, which accounts for depreciation. Since vehicles, especially new ones, depreciate rapidly, the ACV can be significantly less than the amount still owed on the loan, leaving the owner responsible for the difference. Consumers might seek independent GAP coverage if they declined it at the dealership, or if their initial policy did not include it.

Independent GAP Insurance Providers

Consumers looking to purchase GAP insurance separately from a vehicle purchase or loan have several options. Many national and regional auto insurance companies offer GAP coverage as an add-on to an existing policy or as a standalone product. It is often recommended to check with your current auto insurer first, as purchasing GAP coverage from them can sometimes be less expensive than through a dealership. Major insurers like State Farm, Nationwide, Progressive, and Allstate may offer this coverage.

Specialized third-party GAP insurance providers also focus solely on this type of coverage. These companies, such as EasyCare and AutoPay, can be found through online searches or comparison websites. While they offer standalone policies, the cost may be higher compared to adding it to an auto insurance policy. Financial institutions like credit unions and banks sometimes provide GAP policies directly to their loan customers, even if the loan was originated elsewhere.

Information for Purchasing Independent Coverage

To obtain accurate quotes and secure an independent GAP insurance policy, specific information about both the vehicle and the loan is necessary. You will need the Vehicle Identification Number (VIN), along with the vehicle’s make, model, year, and current mileage. These details help providers assess the vehicle’s value and depreciation rate.

Information about your auto loan is equally important, including the original loan amount, the current outstanding balance, the loan term, and the lender’s name. Additionally, details from your existing auto insurance policy, such as comprehensive and collision coverage limits and deductible amounts, are often required. GAP insurance works in conjunction with your primary auto insurance, so these details are essential for eligibility and proper coverage alignment.

Eligibility for Independent Policies and Coverage Scope

Eligibility for Independent Policies

Common criteria exist for a vehicle and its loan to qualify for independent GAP insurance. Many providers impose restrictions on vehicle age and mileage, often requiring the vehicle to be no more than two or three model years old. These limitations are in place because GAP insurance is most beneficial and therefore typically offered for newer vehicles that experience significant depreciation early in their life.

Loan-to-value (LTV) ratio requirements are another common factor, with some providers setting a maximum LTV, such as 115% or 125%, meaning the loan balance cannot exceed a certain percentage of the vehicle’s value. Vehicles with very high LTVs or those with certain types, such as commercial vehicles, may face restrictions. Having comprehensive and collision coverage on your primary auto insurance policy is also typically a prerequisite for obtaining GAP insurance.

Understanding Coverage Scope

GAP insurance is specifically designed to cover the financial difference between your vehicle’s actual cash value and the outstanding loan or lease balance in the event of a total loss due to incidents like theft, fire, vandalism, or accident. It provides protection when your primary auto insurer’s payout is insufficient to fully satisfy your loan obligation. This ensures you are not left owing money on a vehicle you no longer possess.

However, GAP insurance typically does not cover certain expenses. It usually excludes your primary auto insurance deductible, although some policies may cover a portion of it. It also does not cover mechanical repairs, engine failures, or general wear and tear. Furthermore, late payment fees, extended warranties, or negative equity rolled over from a previous loan are generally not covered by GAP policies.