GAP

Guaranteed Asset Protection, commonly called GAP, can address an eligible difference between an auto-loan balance and the insurer’s settlement after the vehicle is stolen or declared a total loss. Depending on the provider and jurisdiction, the product may be structured as insurance or a debt-cancellation agreement. The contract and applicable state rules determine its form and obligations.

GAP does not repair a vehicle, replace required physical-damage insurance, or guarantee that every dollar owed on a loan disappears. The calculation may exclude late charges, skipped or deferred payments, past-due amounts, prior debt rolled into the loan, financed add-ons, negative equity, amounts above a loan-to-value cap, or portions of the insurance deductible. Benefit limits can also apply.

A claim usually requires the insurer’s total-loss valuation and settlement documents, the finance agreement, a current loan payoff, payment history, police or theft records when relevant, and proof that required insurance remained in force. The deadline and document list should be in the agreement. The lender, seller, GAP administrator, insurer, and borrower can each hold different pieces of the record.

Before buying, compare the vehicle price, down payment, trade balance, loan term, expected depreciation, insurance coverage, and the GAP calculation. Ask how refunds work after early payoff, refinancing, sale, repossession, or cancellation. If the product is financed, include its price and finance charge in the total comparison rather than focusing only on the monthly payment.