Accidents happen. But what happens if your car is totaled, but its value is less than the amount you still owe on your auto loan? It's called a coverage gap, and you may have to pay the difference out of pocket.
That's where Guaranteed Asset Protection (GAP) can be a lifesaver. A GAP policy covers the difference between your loan balance and the amount your insurance policy would pay out if your vehicle were damaged beyond repair (totaled) or stolen and never recovered. It pays the "gap" so you aren't burdened by the remaining balance of the loan.
GAP coverage is particularly important if you haven't made a large down payment on a vehicle. The value of the car may drop as soon as you drive it home – so it's not unusual to owe more than the car is worth if you finance the purchase price. It also may be required if you lease rather than purchase a vehicle.
Coverage You Can Count On
GAP coverage is often inexpensive and can be financed into the cost of your auto loan. Check with your bank or credit union to find out if they offer GAP coverage.