GAP stands for Guaranteed Asset Protection. It is optional coverage that pays the difference between what you still owe on your auto loan and what your insurance pays if your financed or leased vehicle is totaled or stolen.
The problem GAP solves: if your car is totaled, standard auto insurance pays only the vehicle's current market value — not your loan balance. If you are upside-down on the loan, that payout can be less than what you owe, leaving you to cover the "gap" out of pocket for a car you no longer have.
How GAP coverage works:
- Your car is totaled or stolen.
- Your auto insurance pays the vehicle's market value (minus your deductible).
- GAP coverage pays the remaining loan balance — the gap.
When GAP coverage is worth considering:
- You made a small down payment.
- You have a long loan term.
- You financed a vehicle that depreciates quickly.
When you may not need it: once you owe less than the car is worth — you have equity — GAP coverage is no longer doing much for you.
GAP is separate from your standard comprehensive and collision coverage, which is what actually pays out when a car is totaled. To talk through your auto financing, see how to apply for an auto loan.