Guaranteed Auto Protection (GAP) Insurance

What is GAP Insurance?

• GAP means Guaranteed Auto Protection (GAP) or Guaranteed Asset Protection (GAP).
• When buying a new vehicle, you should consider buying Gap Insurance. GAP Insurance coverage will pay the difference between what you owe on your car loan and the actual cash value of your vehicle in the event the car is stolen or destroyed. Your car can be totaled by your auto insurance company for more reasons than just a collision. Your auto insurer may total your car if it is damaged through theft, fire, flood, vandalism, storm, tornado or hurricane.
• If you owe more on your car than it is worth, if you lease, or if you have put less than 20% down, GAP Insurance can protect you.
• Buy GAP Insurance through your auto insurance agent. Gap Insurance is less expensive through your auto insurance company than the car dealership.

• Gap insurance for a new car is probably even more important than used car GAP insurance. Your new car loses 20% of its value starting the minute you drive it off the lot.

Without Gap Insurance:

• If you buy a brand new Lexus for 60,000 dollars, you just lost 12,000 dollars driving out of the car lot on your way home (that's called depreciation).
• If your car is wrecked (totalled) or stolen and you still owe 20,000 dollars on your auto loan, but it's only worth 16,000 dollars, you are resonsible to pay the 4,000 dollar difference still left on your auto loan. This means you will be paying off a loan on a car that you can't even drive.

With Gap Insurance:

• If you are a victim of auto theft or are in an accident, GAP Insurance can help.

Limits of GAP Insurance Coverage:

• It is important to be aware of what GAP insurance will and will not cover: (ask your auto insurance agent to be sure)
  • If you have any overdue loan or lease payments at the time of the loss, they will not be covered.
  • If you have any financial penalties imposed for excessive use, abnormal wear and tear or high mileage, the GAP insurance will not cover those.
  • Security deposits are not refunded by the * lessor (the leasing company). GAP insurance will not pay for carry over balances from previous loans or leases.
  • GAP insurance will not cover the cost for extended warranties or mandatory insurance purchases with the loan or lease.

Some Facts

• Did you know that auto theft is an estimated $7.8 million industry. A theft takes place every 27 seconds. (Insurance Information Institution, 2000)
• Nearly half (46.9%) of all stolen vehicles are not recovered in the U.S. (Federal Bureau of Investigation Uniform Crime Report)
• There were an estimated 6,394,000 police reported vehicle crashes in 2000. (National Highway Traffic Safety Administration)
• Gap Insurance applies to your loan or * lease, and only applies in the event of the unexpected end of your loan or lease due to a total loss covered by your policy. The coverage will pay for any unpaid amount due on the loan or lease for your covered auto. You must also have * comprehensive and * collision insurance.

Glossary For This Page
(In Alphabetical Order)

* Collision
An insurance policy that pays for the damage "you cause" to your covered vehicle when you collide with another vehicle, or object (movable or fixed), or overturns. Example: You accidentally backed into another object while pulling out from a parking space, causing damage to the bumper.

* Comprehensive
An insurance policy that pays loss or damage to your covered vehicle caused by (but not limited to) fire, theft, windstorm, flood, and vandalism.

* Lease
A contract agreement between the lessee (you) and the lessor (the leasing company) for temporary use of a vehicle for an agreed period of time and for a specified payment, that you pay to the leasing company without actually buying the vehicle. The company leasing the vehicle continues to own the vehicle. The vehicle is returned to the leasing company when the lease expires unless the lessee (you) decides to buy the vehicle, if the contract allows for that option.

* Lessor
The leasing company or lender, such as a car dealer, or bank, which leases the vehicle to you.

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