---
title: "GAP FAQ: A Buyer’s Guide to Guaranteed Asset Protection"
description: Learn how to preserve vehicle value by protecting it from the elements, enhancing its appearance, and reducing maintenance.
image: https://blog.agws.com/hubfs/AGWS_GAP_feature.jpg
---

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# GAP FAQ: A Buyer’s Guide to Guaranteed Asset Protection

[AGWS](https://blog.agws.com/author/agws)

 Feb 18, 2025 9:30:00 AM

![AGWS_GAP_header](https://blog.agws.com/hs-fs/hubfs/AGWS/AGWS_GAP_header.jpg?width=960&height=640&name=AGWS_GAP_header.jpg)

If you’ve ever bought a car from a dealership, you’ve likely been offered [guaranteed asset protection (GAP)](https://www.agws.com/products/automotive/auto-compass-gap) products along with an additional warranty and other options in the finance office. But many buyers don’t know ahead of time what to expect during the purchase, so you might not have known exactly what you were buying — or not buying — when presented with GAP coverage. Let’s make sure that next time, you do.

**What is GAP coverage?**

Simply put, a GAP addendum fills the gap between what you owe on your car and its appraised value if it’s deemed a complete loss through theft or damage.

For instance, say you buy your car for $45,000. After a few years, it’s worth $29,000, but you still owe $35,0000. If the vehicle is totaled, your GAP waiver will pay the difference between the $29,000 the insurance company will pay and the $35,000 you still owe the bank.

**Who needs it?**

Vehicles depreciate rapidly in the first years of ownership, meaning there will likely be a time when you owe more than the appraised value. This is more likely if:

- Your down payment is low in comparison to your purchase price.
- You finance for a longer term.
- You roll over an existing loan into a new purchase.
- Your car has a higher-than-average depreciation rate.

**Is it required?**

GAP is not required by law as a condition of vehicle ownership. However, some lenders may require GAP coverage if you’re leasing your vehicle.

**What does it cover?**

GAP coverage is only for instances where the vehicle is declared a total loss by your comprehensive or collision insurance company and you owe more than the value your insurance appraises it for.

**What does it not cover?**

Your GAP addendum does not cover property or injuries resulting from an accident. It also doesn’t cover vehicle rental after a theft or accident. Excess mileage charges on a lease are excluded as well.

**When do I file a claim?**

If insurance (either yours or another driver’s) pays out for an accident or loss and there is still a balance left on your loan after the payout amount, you’ll file a GAP claim to pay off the rest of the loan. If the insurance coverage is enough to cover your loan, you don’t need a GAP claim, and you should cancel your GAP policy.

**Does it pay my insurance deductible?**

GAP coverage will commonly pay up to $1,000 of your comprehensive or collision insurance deductible when a claim is filed for a loan balance. If there is no balance to pay, GAP coverage can’t be used to pay only the insurance deductible.

**Are there cases where it would not pay out?**

There are some cases where a claim might be fully or partially denied. This could happen if:

- You were behind on your loan or lease payments.
- You are within the initial waiting period for the policy go into effect.
- The claim is greater than your policy payment limits.
- There was any fraud or misrepresentation on your policy application.

**Conclusion**

A new vehicle is a big investment. A GAP waiver can help you protect your purchase and future finances. Before visiting a dealership, examine your financial circumstances and your vehicle choices to help decide which coverage is right for you.

[Insurance](https://blog.agws.com/tag/insurance), [Depreciation](https://blog.agws.com/tag/depreciation), [GAP](https://blog.agws.com/tag/gap)

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FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY. The information provided in or throughout this blog is for educational and informational purposes only. The content herein does not necessarily reflect the services that AGWS provides.  2025 Copyright AGWS. All rights reserved.

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