Is Gap Insurance Worth It? Understand This Crucial Auto Coverage

Is Gap Insurance Worth It? Understand This Crucial Auto Coverage

Is Gap Insurance Worth It? Understand This Crucial Auto Coverage

While purchasing a vehicle with finance, we often hear about GAP, but the question remains: Is gap insurance worth it? To shed light on this topic, we turn to experts who offer valuable insights into the benefits and considerations of this often-overlooked aspect of automotive coverage. We all know that protecting our newly purchased automobile is mandatory. In the following, we will help you determine whether gap insurance is worth it depending on its costs, coverage options, available providers, and many more.

What is GAP insurance?

Gap insurance, also known as ‘Guaranteed Asset Protection’ insurance, is a specialized form of coverage that fills the void between the amount owed on a vehicle loan or lease and the vehicle’s actual market value. It provides supplemental coverage filling the “gap” between what your standard auto insurance covers and the remaining amount owed on your car loan or lease in case of a total loss or theft. Finding the answer to the topic – Is Gap Insurance Worth It, also requires understanding how the insurance works. 

How does GAP insurance work?

When a car is deemed a total loss due to a brutal accident, theft, or natural disaster, standard auto insurance will only refund the vehicle’s actual cash value at the time of the incident. However, considering the rapid depreciation rates of vehicles, especially in the initial years of ownership, this refund may fall short of the remaining loan balance, leaving the car owner responsible for covering the difference out of their pocket. Gap insurance covers this shortfall, ensuring the car owner isn’t burdened with an unexpected financial setback.

Is Gap Insurance Worth It?

While gap insurance can offer valuable protection, its necessity varies based on individual financial circumstances and car purchase or lease details. According to experts, auto dealers and financing companies may encourage customers to purchase gap insurance because the lender will suffer a loss if something happens to the car and the borrower cannot make payments. Calculate the numbers before visiting the dealership and shop for coverage to determine whether gap insurance makes sense.

Consider Companies and Their Processes

Consider Companies and Their Processes

To understand – is gap insurance worth it in your case, you must understand the companies and their offerings on insurance coverage. When you purchase, you can obtain Gap insurance through your auto insurance provider or the dealership. Additionally, some banks and credit unions also offer this kind of insurance.

While buying a policy from a dealership may sound practical, purchasing gap insurance from your insurer will be cheaper. In combination with comprehensive and collision coverage, gap insurance averages your annual premium by about $20.

Is Gap Insurance Worth It? – Consider The Costing

One of the primary concerns regarding gap insurance is its cost. It may vary depending on the provider and the vehicle’s make and model. And gap insurance premiums can add extra bucks to your overall insurance expenses.

Consider Pros and Cons

While considering the topic – is gap insurance worth it for you or not, understanding the pros and cons is crucial. As with any insurance coverage, gap insurance also comes with some advantages and limitations. On the positive side, gap insurance offers peace of mind, knowing you won’t be stuck with debt if your car is written off. It can provide invaluable financial protection during the early stages of your loan when the depreciation rate is steepest.

What Does GAP Insurance Cover?

When you are thinking, is gap insurance worth it? Does it cover all the payout? To answer all these queries, we have gathered the information here.

As mentioned above, GAP insurance will only cover scenarios like theft and accident. Your comprehensive auto insurance policy will cover other damages to your vehicle.

Does it always payout?

Gap insurance only pays out if your total loss claim is accepted and the proceeds from the sale of your car fall short of paying off your remaining loan balance. If another driver was at fault, gap insurance could also pay the difference between the settlement amount offered by their insurance company and the outstanding loan.

When does gap insurance not pay

When does gap insurance not pay

You must understand the situation of GAP insurance payouts when you are concerned about the topic – ‘Is gap insurance worth it or not?’.

Coverage Lapse: If you fail to make timely payments for your regular auto insurance policy or gap insurance premiums, there could be a coverage lapse. In such cases, the gap insurance may not be valid, and the policyholder may not receive any benefits.

Intentional Damage: Gap insurance typically covers accidental damage, theft, or total loss due to unforeseen events. However, it may not provide coverage for intentional damage caused by the policyholder, such as deliberate acts of vandalism.

Vehicle Misuse: If the vehicle is used for purposes not covered by the insurance policy, such as commercial use when the policy only covers personal use, the gap insurance may be voided.

What Are The Different Types of GAP Insurance?

Learning the different levels of gap insurance is also necessary to thoroughly understand the topic – Is Gap Insurance Worth It for You? There are various types of GAP insurance available on the market. Combined GAP and Return to Invoice GAP Insurance are the method that Swissvans offer.

Combined GAP and RTI – Return to Invoice GAP Insurance

This insurance will bridge the difference between the amount your auto insurance will pay out and the price you paid for it. This insurance can save you from going into debt. The Combined GAP works by paying out the greater amount of the Finance GAP.

Is gap insurance worth it to purchase a luxury vehicle?

If you are leasing or financing a luxury vehicle, GAP insurance could be a worthwhile addition to your insurance plan. Gap insurance may help you make up the difference if your car is totaled or taken away and you owe more than it is worth. The insurance provider will pay out your car’s actual cash value (ACV) if you submit a total loss claim. Gap insurance covers the difference between the ACV and the remaining balance of your auto loan.

Gap Insurance on Used Cars

Gap Insurance on Used Cars

Is gap insurance worth it on a used car? This is a common query people often ask. Additionally, there are some particular situations when having gap insurance on a used car loan may benefit you, such as:

  • If your car is less than three years old, the more recent the model, the quicker it will depreciate.
  • Your deposit is usually 20% or less.
  • Your car loan is a lengthy one (at least 48 months)
  • You travel a lot of miles

Can You Cancel GAP Insurance?

Many car owners ponder, ‘Is gap insurance worth it?’ before deciding whether to add this additional coverage to their auto insurance policy. And in such cases, cancelation of the insurance comes in. Canceling your GAP insurance requires contacting your insurer. They can provide you with paperwork to fill out to cancel your policy and receive a refund for any unused funds. You can also cancel gap insurance by sending a documented request with your name, address, and VIN. It is also possible to cancel online, but only if you obtained coverage from an insurance company rather than a dealership.


So far, we have covered all the necessary points the experts have discussed about whether gap insurance is Worth It. I hope we have answered all your concerns about the topic –  Is gap insurance worth it? To conclude, gap insurance can offer invaluable peace of mind and financial security, making it a wise consideration for many car owners in today’s unpredictable driving world. Moreover, discussing with professionals before purchasing or financing a vehicle through GAP insurance is advised. If you want to invest in a vehicle using gap insurance, visit swissvans and see our collections and availability of GAP insurance coverages.


1.  Q: How to Calculate GAP Insurance?

A: If you need clarification on the topic – is gap insurance worth it or not? Knowing the calculation will help you.

Firstly, you must know how much you owe the loan company when your vehicle is stolen or gets into an accident. Secondly, you must know your car’s current value after depreciation to calculate it.

Suppose your car is currently worth $20,000 on the market. If you owe the loan provider $25,000, you should determine your gap insurance according to this formula.

Your car costs (A) $20,000.

Your car loan (B) $25,000.

GAP will pay – (B-A) = $5,000.

2.  Q: How long does it take for gap insurance to pay out?

A: It might take from one week to several weeks. The precise timeframe depends on the complexity of your claim and your state’s laws.

3.  Q: What are the GAP insurance requirements?

The general requirements for GAP insurance may include the following –

  • Your car must be listed in Glass’s Guide
  • Your vehicle must have UK registration and not be left-hand drive.
  • Your car must not have been written off, and the policyholder must also be the owner or registered keeper of the vehicle. The owners of the vehicles must have full-coverage UK auto insurance.

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