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Mind the gap: The basics of vehicle GAP coverage

On Tuesday, Sarah Maddigan for Ally Financial reported that Guaranteed Asset Protection, or GAP, helps bridge the financial difference between a vehicle's actual cash value and the remaining loan balance if a car is totaled or stolen.
Because vehicles depreciate over time, a car's market value often falls below the outstanding loan amount, creating a gap that standard auto insurance only covers at current market value and will not fully pay in total loss situations.
If you owe $22,000 on a vehicle but the insurer determines the actual cash value is $18,000, GAP insurance may help cover the $4,000 difference, a protection valuable for drivers with long loan terms or small down payments.
Buyers can typically purchase GAP coverage when signing lease or finance contracts, or as an optional add-on through auto insurance companies, though some lenders or lessors may require this coverage as part of loan or lease agreements.
GAP insurance does not cover insurance deductibles, extended warranties, or carry-over balances from previous loans, as the coverage specifically addresses the difference between vehicle cash value and remaining loan balance rather than additional fees.

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