What is GAP Insurance?
Insurance glossary entry on BeCovered.ai for the term "GAP Insurance": Coverage that pays the difference between ACV on a totaled car and the loan/lease balance. Scope: plain-language meaning for coverage discussions; confirm definitions on your policy forms.
Coverage that pays the difference between ACV on a totaled car and the loan/lease balance.
Understanding GAP Insurance
GAP protects against negative equity after depreciation. It is common on financed new vehicles. Dealer GAP may cost more than insurer-added GAP—compare pricing and exclusions.
Examples
- Loan balance $28,000 but ACV only $22,000 after total loss—GAP pays $6,000 subject to terms.
- Lease GAP embedded in manufacturer lease protection package.
Common Questions About GAP Insurance
Does GAP cover missed payments?
No—GAP addresses total loss valuation gap, not delinquency or late fees.
When can I cancel GAP?
When loan-to-value is safe—some lenders allow removal after threshold; refunds of unearned premium may apply.
Related Insurance Types
Related Terms
Actual Cash Value (ACV)
The value of property at the time of loss, calculated as replacement cost minus depreciation.
Premium
The amount you pay to your insurance company for your coverage, typically monthly or annually.
Exclusion
Specific situations, conditions, or types of damage that your insurance policy does not cover.
Claim
A formal request to your insurance company for payment or coverage for a loss or policy event.