What Is GAP Insurance?

If you have recently purchased a new or used vehicle, you were likely offered an opportunity to purchase Guaranteed Asset Protection or “GAP” insurance. This covers the difference between the amount that you financed and the vehicle’s actual value. Before you agree to the extra cost of that insurance, call the law offices of Douglas and London to speak with one of our New York City car accident lawyers. They can advise you as to whether you need that insurance– and if there are less expensive alternatives that might offer the same protection.

GAP Insurance and the Depreciating Value of Your Car

The insurance industry created GAP coverage in response to how a car begins to lose its value as soon as you drive it away. You might, for example, agree to purchase and finance the full amount of a car that a dealer agrees to sell to you for $20,000. That car might then have an assessed value of $15,000 as soon as you drive it off the dealer’s lot.

If an accident totals the vehicle on the day that you purchased it, and unless you have full replacement insurance coverage, your auto insurer will only reimburse $15,000 for the vehicle’s assessed value. You will still be liable, however, for the full amount of $20,000. GAP insurance will reimburse you for this difference.  

When Might You Need GAP Insurance

If the principal balance of your auto loan is close to the assessed value of your car, you probably will not need or want this. Alternately, you might get a greater benefit from GAP insurance if:

  • you financed the entire purchase price of your car, with little or no down payment;
  • your auto loan extends beyond 48 months, in which case your car’s value will depreciate faster than the rate at which you will pay down the loan;
  • you intend to put a lot of miles on your car, or you will put other stresses on it that will cause it to lose its value more quickly;
  • industry ratings suggest that your car loses value more rapidly than the average depreciation rate of similar vehicles.

Negotiating the Cost of GAP Insurance

Auto dealers often charge a flat amount of $400 to $800 for a GAP insurance policy that remains in force for the duration of the loan. That amount might be included in the loan, or the purchaser might pay it separately. The dealer will typically realize a profit of between $200 and $300 on each policy it sells. Given this, you may be able to negotiate a lower charge. You can also check with your insurer, who might offer similar coverage as part of your policy.

If you did purchase GAP insurance and have been diligent about paying down your auto loan– you should periodically compare the remaining balance on your loan and your car’s assessed value. As those two amounts converge into a single value, you can cancel your GAP insurance. At this point, you can either receive a refund of any excess premiums that you paid or reduce your monthly car loan payment.

Recovering Damages for Your Losses if You Do Not Have GAP Insurance

If a negligent driver causes an accident that results in the total loss of your vehicle, chances are that you will also suffer injuries that require medical attention. If you do not have GAP insurance, not only will you be liable to repay the excess amount of your liability for the damage to your car, but you may also face large medical bills and other expenses.

A personal injury attorney is your best advocate in these circumstances. They will work within New York’s “no-fault” car insurance laws to help you recover the largest available reimbursement. Your personal injury lawyer might also have reason to file a lawsuit on your behalf against the other driver. Those losses will include that portion of your auto loan that you remain liable for– after your insurer reimburses your lender for the assessed value of your car.

Call Us for More Information About GAP Insurance

If you have any questions about GAP insurance, or if you are facing any liability for an auto loan balance after a negligent driver has caused an accident, please contact our New York City personal injury lawyers at Douglas and London. We represent drivers who have suffered property losses and injuries in car accidents in Manhattan, the Bronx, Long Island, Queens, and elsewhere in New York State.  


  1. Nerd Wallet: Gap Insurance: What It Is and Who Needs It.  https://www.nerdwallet.com/blog/insurance/car-insurance-basics/is-gap-insurance-worth-it/
  2. Credit Karma: What is Gap Insurance? https://www.creditkarma.com/auto/i/what-is-gap-insurance/
  3. Bankrate: What is GAP Insurance and What Does It Cover? https://www.bankrate.com/insurance/car/gap-insurance/