What Is Gap Insurance and Do You Need It?
🇩🇪 Diesen Artikel auf Deutsch lesenGap insurance pays the difference between your car's actual cash value and what you still owe on your loan or lease if the car is totaled or stolen. It's most useful with small down payments, long loans or leases. Buying it from your auto insurer is often much cheaper than from the dealer.
New cars lose value quickly. If you finance most of the price, you can owe more than the car is worth for the first few years — a situation called negative equity.
How gap insurance works
| Example | Amount |
|---|---|
| Loan balance | $28,000 |
| Car's actual cash value after total loss | $22,000 |
| Collision payout (minus $500 deductible) | $21,500 |
| Gap without coverage | $6,500 you still owe |
Gap insurance pays that remaining balance (some policies also cover the deductible).
When you need it
- Down payment under about 20%.
- Loan term of 60 months or longer.
- Rolled-over negative equity from a previous car.
- Leases — many already include gap coverage; check the contract.
Where to buy
Dealers often add gap coverage to the loan, which means you also pay interest on it. Many auto insurers offer it as an inexpensive add-on. Credit unions may also offer it at lower prices.
Loan Payment CalculatorMonthly payment and total interestTry the calculator →Frequently asked questions
Does gap insurance cover repairs?
No. It only applies when the car is totaled or stolen and not recovered.
Can I buy gap insurance later?
Many insurers only sell it for newer cars and to the original owner or lessee, so it's easiest to add when you buy the car.