--- title: Guaranteed Asset Protection (GAP) Insurance url: https://www.leaseend.com/learn/guaranteed-asset-protection updated: 2024-05-17 --- ## Guaranteed Asset Protection (GAP) Insurance Ever heard of GAP insurance? Take a break with some easy reading to learn more about this essential coverage for anyone in a lease or loan. ## What is GAP insurance? If you owe money on a car (through a loan or lease) **Guaranteed Asset Protection (GAP) insurance** is essential. Standard insurance policies—like liability, collision, or comprehensive coverage—can help reimburse costs like: Medical charges resulting from an accident. [Repairing](https://learn.leaseend.com/can-i-repair-a-leased-vehicle-by-myself) vehicle damage. Replacing the vehicle in the event of a total loss. Instead of covering any physical damages, GAP insurance is like **coverage for your finances **in the event of a **total loss** on your vehicle. ### How does GAP insurance work? Here’s an example: you took a loan out to get your car, and your vehicle is declared a total loss after [an accident](https://learn.leaseend.com/what-happens-if-you-crash-a-leased-car). All passengers are safe, and you get an insurance payout to cover the cost of replacing your vehicle. That’s great, all things considered. But if you still **owe more on the car than it’s worth**, things get a bit more complicated. Let’s say you financed your vehicle for $30,000, you’ve paid off $8,000 so far, and your car’s current market value is $15,000. If your car is stolen or totaled, you’ll get reimbursed according to that $15,000 market value. (We’ll ignore your deductible for now, but remember that in real life, you’ll have to factor it in.) So, you’ve got $15,000 from the payout, but you’re still on the line for the remaining $22,000 balance on your auto loan. Subtract that payout from the remaining balance ($22,000-$15,000) and you'll owe a net of $7,000 on a car you can no longer drive. That $7,000 “gap” in your finances is what GAP insurance will cover so you’re not left hanging during a bad time. ### What does GAP insurance cover? GAP insurance is only helpful for people who owe money (or, have **negative equity**) on their vehicle. Each policy should be reviewed on an individual basis, but will usually cover your financial “gap” in situations like: Total loss from motor vehicle accidents. Total loss from natural disasters. Vehicle theft. ## Do I need GAP insurance for a leased car? Unlike liability insurance, GAP insurance is **not *****legally***** required**. However, most leasing companies themselves do require this kind of coverage. ### How much does GAP insurance cost? As with any insurance policy, GAP rates are determined by a number of factors. As an add-on to another coverage policy, the bill generally comes to about $20/year. If you (or your lender) decide to make a one-time payment instead, it’ll typically come out to anywhere from $200 to $500. ## Is it worth it? For those with [negative equity](https://learn.leaseend.com/4-things-to-know-about-equity-and-your-leased-car) in their vehicle, we generally recommend GAP insurance. If you’re leasing, you’re probably already paying for it as part of your agreement. If you’re buying out your leased car or financing a vehicle, it’s *most* critical if any of the following are true: You’re unable (or unwilling) to cover the financial burden in the case of total loss or theft. If your desired car depreciates faster than average. You have a longer loan term. Your down payment (if any) will be low. Even if none of those apply to you, it still may be a good idea to get GAP. Cheaper policies are fairly affordable, and can cover you big-time should you need it. ## Bonus: Common GAP Insurance Myths (Busted!) **Myth 1:** You *have* to buy GAP insurance from your dealership. *Truth:* Auto insurance providers often offer it at lower rates. **Myth 2:** GAP insurance covers *everything*. *Truth:* It covers the difference between your car’s value and what you owe—but not lease termination fees, mileage overages, or personal items. **Myth 3:** It’s always required. *Truth:* Some leasing companies include it automatically, but it’s not legally mandated. ## Final Thoughts Want to learn more about GAP insurance, extended coverage, and your end-of-lease options? [Lease End](https://www.leaseend.com/) is here with help. Check out the rest of our blog for valuable insight into leasing, tips & tricks for dealing with the dealership, and, of course, **lease buyouts**. Or, give our advisor team a call at (888) 307-5197 for a personalized quote on extended coverage for a buyout.