Does GAP Insurance Cover a Total Loss?

Guaranteed Auto Protection (GAP) insurance is one of a few types of car insurance that can cover accident-related costs. But what if your car is totaled? Most policies limit the coverage amounts and types of coverage  (collision, medical, uninsured motorist, etc., but not a totaled car). GAP insurance does cover a total loss, and we’ll explain how it works.

How Does GAP Insurance Help?

A car begins to depreciate as soon as you drive it off the dealership’s lot (it can lose as much as 40% of its value in five years, depending on the vehicle1). But you still owe the full amount of the loan on the initial purchase price. In other words, you owe more than the car is worth (meaning your loan is “underwater” or “upside-down”). GAP insurance exists for this reason. Insurers or lenders often refer to it as loan/lease gap coverage. 

Being underwater on loan payments creates a few problems. The insurance company won’t reimburse you for the value of the car if it’s damaged or totaled. But GAP insurance covers the difference between what it pays you and what you still owe at the time the vehicle is totaled or stolen. It will first subtract the deductible before the payout is issued.

Do I Need GAP Insurance?

Every car owner has a unique financial situation and comfort level. Therefore, the type and amount of car insurance you need will differ from that of someone else. GAP insurance is most advantageous to someone who:

  • Purchases a luxury vehicle or SUV, which tends to depreciate more than other vehicles.
  • Has paid a minimal down payment and thus takes out a larger loan.
  • Requires five or more years to pay off a loan; the longer timeframe increases the odds of losing a car.
  • Has leased a car, in which case insurance covers only depreciated value. Lenders may require purchasing GAP coverage.

Since lease insurance covers only the car’s cash value, dealerships often require lessees to obtain GAP coverage. A totaled car is a loss for the dealership. And you’ll still have to pay off the difference between the lease balance and the car’s market value. With GAP insurance, the costs are covered, and the dealer doesn’t risk having an owner of a totaled vehicle walking away.

You have the option of canceling GAP coverage at any time. It makes sense only if you’re no longer making payments on the car. Or, you can eliminate the expense if you no longer owe more on the vehicle than its base value. 

What Is Not Covered?

The coverage provided by GAP insurance is very specific. It won’t cover something just because your base policy doesn’t. For example, it does not include coverage for:

  • Repairs if your car is still drivable
  • Loan payments if you suffer financial hardship
  • Down payments on a new car
  • A damaged, yet usable, car’s reduced value
  • Costs for an extended warranty
  • Late payments and fees on a loan/lease

GAP insurance cannot be used unless you total your car or it’s stolen. It also increases your insurance premium. While GAP coverage adds about $60 annually to a policy issued by an insurance company, a car dealership may offer similar coverage for as much as $600.¹

To find the best deal, shop around with different insurance companies. Not all offer GAP coverage, but find those that do and whether a company offers a discount for bundled policies. If you have a safe driving record, you may be eligible for reduced rates. GAP insurance is strongly recommended when purchasing or leasing a new vehicle and for first-time drivers.

Call Jacob for More Insurance Advice and Legal Help

At The Law Offices of Jacob Emrani, we’re highly knowledgeable about car insurance and its benefits. Recovering financial compensation is a priority if you experience an auto accident and personal injury. Our car accident attorneys in Los Angeles can help fight for your rights and obtain the compensation you deserve, including the maximum amount allowed under your insurance policy. For a free consultation and to learn more about if GAP insurance covers your total loss, call (888) 952-2952.



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southern california


714 W. Olympic Blvd.
Suite 300
Los Angeles, CA 90015


Our Main Location

Los Angeles

serving southern california


714 W. Olympic Blvd.
Suite 300
Los Angeles, CA 90015


(888) 508-5085