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Do I need GAP insurance? Is it worth it?

Generally speaking, if you are financing or leasing a brand new vehicle, you should probably have Guaranteed Asset Protection (GAP) insurance. Buying a new car is a great feeling. But if the worst case scenario happens, such as your new car is stolen or written off in an accident, you could be left with a hefty car loan to pay off and no car.

Is GAP insurance worth having?

Like most things in life, there are risks - good or bad - with every decision. Consider the financial costs of paying for insurance and also the risk that comes with not having insurance and losing such a huge asset. Could you afford to be without a car? Could you afford to keep paying for a car loan after the car has been totaled? Only you can make this decision for yourself.

GAP insurance is optional car insurance coverage that helps pay off your auto loan if your car is totaled or stolen and you owe more than the car's depreciated value. Keep in mind, GAP insurance will only cover the difference between your car's actual cash value at the time of loss and the amount you owe on your car loan. Of course, GAP insurance is not useful if the amount owed on the vehicle is less than the current value.

Do I still need to buy collision or comprehensive coverage if I have GAP insurance?

Most likely, yes. Many GAP insurance policies can only be bought if you have collision/comprehensive coverage for the vehicle. Collision coverage pays for damages resulting from a collision, regardless of who is at-fault. Comprehensive coverage pays for damages from non-collision events such as fire, vandalism or falling objects.

Both of these coverages will only pay for damages up-to the current Actual Cash Value (ACV) of your vehicle. If the damages exceed the value of your car, the insurance company will deem it a total loss.

Imagine a scenario in which you purchase a new car with a loan of $30,000. Your monthly payments are $300. 6 months later, due to an unforeseen circumstance, your car is totaled by your insurance company at a market value of $25,000. You have only paid $1,800 towards your loan at this point. Let's break it down.

Purchase / Loan Amount$30,000
Amount Paid Towards Loan after 6 months-$1,800
Collision/Comprehensive Pays Actual Cash Value-$25,000
Total Amount Still Owed Without GAP Insurance$3,200
Total Amount Still Owed With GAP Insurance$0

In the above scenario, GAP insurance will then pay for the remaining $3,200 owed to the loan company after your collision/comprehensive coverage pays the current cash value of your car.

Always read the terms and conditions of any insurance policy you purchase.

Just like collision or liability policies, GAP insurance policies have policy limits. Policy limits are the maximum dollar amount an insurance company will pay out for your vehicle. Some have a flat dollar amount and some cover an amount as a percentage of the actual cash value of your car at the time of loss. Make sure to choose a policy that will cover your financial situation.

If you've been seriously injured in a car accident, Stanley and Associates is here to help!

Call 972-833-8000 for a free consultation regarding your potential injury case. Don't let the insurance company tell you what your case is worth.

Our Attorneys Fight for Maximum Compensation

Jacob s. hughey

Attorney and Partner

Jacob is a compassionate, no-nonsense personal injury attorney. Rest assured, he will fight for the best outcome possible for your injuries.

Dustin C. Brown

Attorney and Partner

Dustin practices law for the individual because people need a strong voice in their corner.

Why Choose Stanley & Associates?

decades of combined experience

Our firm provides its clients with knowledgeable, personalized representation in the following practice areas: Auto Accidents, Work Accidents, Dog Bites, Premises Liability (slip and fall cases), and more.

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We know that money is a big deciding factor when choosing an attorney, which is why we don't take payments from our clients up-front. We only get paid when YOU get paid!

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Insurance companies are not looking forward to helping you get better or paying for your damages. They will say and do anything to avoid paying you what you deserve! Hiring an attorney is a great motivator and puts the insurance companies on notice. We're on YOUR side!

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