GAP Insurance FAQs
As of July 15, 2020
What is GAP insurance?
Guaranteed auto protection insurance (GAP) is an optional coverage that may be
purchased when physical damage coverage (comprehensive and collision coverage) is
included in your auto policy. GAP insurance provides valuable protection if you have a
loan or a lease on your car. Not all insurers offer GAP coverage. GAP coverage is
particularly important if you have purchased or leased a vehicle with little or no money
down.
What does GAP insurance cover?
If your car is considered a total loss because of a collision, theft or other covered loss,
GAP insurance generally will pay the difference between the actual cash value of the
vehicle and the current outstanding balance on your loan or lease.
Isn’t that covered by my automobile insurance?
No. When you purchase an auto insurance policy, you are only insuring your vehicle for
its actual cash value (ACV), not the amount of the loan. If you suffer a loss in which your
vehicle is deemed a total loss, your insurer will only pay the ACV. If you owe more than
the ACV, you will be responsible to pay off the balance of the loan or lease.
Where can I purchase GAP coverage and how much does it cost?
Many factors may determine the cost. In many cases, you may purchase GAP
insurance directly from your auto insurer. Contact your insurance producer (also known
as an agent or broker) or insurer to find out if they offer GAP coverage and to receive a
quote. An alternative product known as a debt cancellation agreement can often be
purchased at the dealer when you purchase or lease a vehicle through the lender or the
dealer. Debt cancellation agreements are not insurance policies and are not regulated
by the Maryland Insurance Administration. If you have a dispute concerning a debt
cancellation agreement, you should contact the office of the Attorney General's
Consumer Protection Division at 410-528-8662.
Can you get GAP insurance after you purchase a car?
You should check with your auto insurer or insurance producer to find out if you can
obtain GAP insurance after your purchase.
