GAP Insurance For a Stolen Car: How Does It Work?

GAP insurance for stolen cars cover the difference between your car's market value and your outstanding loan.To get GAP insurance for a stolen vehicle, file a claim, and get an actual value appraisal.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

UPDATED: May 18, 2022

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Here's what you need to know...

  • GAP insurance stands for guaranteed auto protection
  • If you have gap insurance, the difference between what you still owe on your car or truck and how much the car is worth will be covered
  • If your car is stolen, gap coverage can make up for the difference in the fair market value of your car and what you have left to pay on a loan

Gap insurance is a very specific type of coverage that only applies when you need to cover the “gap” between the value of your vehicle and the outstanding balance you owe on the vehicle loan.

Does GAP insurance cover theft? If you lease a car or are in the early stages of your vehicle loan, gap coverage can be an inexpensive way to make sure that you are not left to pay additional amounts on your car loan if your vehicle is stolen. If you’re looking for GAP insurance, stolen cars may not be covered. Read on to find out.

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What is gap insurance?


Gap coverage or insurance is also called guaranteed auto protection. The basis for gap insurance is that as soon as you take the car off of the dealership lot, it begins to depreciate in value.

If you are in the beginning stages of paying off a car loan, there is a possibility that your loan obligation will be greater than what the car is currently worth.

In the event that you have a total loss on your car, then cap coverage would help make up this difference for you.

Many car dealerships or lending institutions will require that you maintain coverage above what is required under the state minimum amounts.

This is typically referred to as collision and comprehensive insurance. The important thing to remember about these supplemental insurance policies is that they only cover the fair market value of your car.

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When Gap Insurance is a Good Idea

Not every vehicle is a good candidate for gap coverage. It is typically used for vehicles that are financed or leased.

Because adding gap insurance with collision coverage and comprehensive insurance only means a small increase in your annual insurance premium, it can be an attractive choice for some drivers.

The most common circumstances for getting gap coverage on your car or truck include:

  • If you put little to no money down on the purchase of your vehicle and have a high loan payment you may end up owing more than the value of your vehicle in an accident
  • If you financed your car for 60 months or longer, you may still have payments to make in the event of an accident
  • When you lease your vehicle, you may be required to get gap insurance by the car dealership
  • If you purchased a unique vehicle that depreciates faster than average, then gap insurance could be a good idea for you
  • If your lender allowed you to roll over a negative equity loan balance from a separate vehicle into a new auto loan, then you should almost certainly take out gap insurance
  • If you are considering whether gap insurance is right for you, it is a good idea to speak to your existing insurance agent to find out what is covered under your policy.

You may also be able to get a discount on gap coverage if you are already insured for other policies from that same company.

In addition, it is always a good idea to mention the type of car you are considering buying or leasing when calling around for car insurance quotes to find out if gap coverage is advisable in your situation.

Paying for Gap Insurance

When you purchase gap insurance, you are really only trying to cover the gap between the fair market value of your car and the remaining amount left to pay on your car loan.

The way that gap insurance is usually billed is by including it in your regular premium.

There will come a point when you have closed the gap, meaning you owe very little left on your car loan or the fair market value of your car has not depreciated past what you owe on your loan.

You should request to cancel your gap coverage at this point so that you are not paying for something that you do not need.

In general, gap insurance can cost more when purchased from the car dealership than through a traditional insurance company.

Before purchasing gap insurance from the dealership, be sure to call around for quotes on gap insurance coverage to make sure you are getting the lowest rate possible.

Gap Insurance for a Stolen Car or Truck

Car thief

The FBI reports that a car is stolen every 44 seconds in the U.S. If your car or truck is stolen, the first thing you need to do is call the police and file a claim with your insurance company.

Does GAP cover stolen cars? The insurance company will determine what the actual value of your car is and will compare that to what you still owe on your vehicle loan.

If you end up still owing more than what the car would be worth, then you are covered for that difference through gap insurance.

It is important to act quickly in filing a claim because there may be certain deadlines for notification and reporting under your state’s laws and your insurance policy.

Your insurance agent will be able to assist you with the claim process for a stolen vehicle. Be sure to specify and ask if GAP insurance cover stolen cars.

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Does liability insurance cover a stolen car?

Liability insurance will only cover you if you cause bodily injury or property damage to someone else, but it won’t cover a stolen vehicle.

If I bought my car outright, do I need gap insurance?

There’s no reason to buy this coverage if you bought a car with cash and own it without a loan. It is for when you owe more than the value of your vehicle. If you have the car paid off, and it’s no longer financed, you don’t owe any more than the car is worth, and so there would be no payout from gap coverage.

Is gap insurance worth it?

The answer to this question depends on your situation. Gap insurance may be worth it if you owe a lot more than what the car’s worth.

So, for instance, if you bought an $80,000 car and only put down $5,000, you may want to get gap insurance, so you’re not stuck having to make up the difference if an insurer totals your car.

If the outstanding loan or lease balance is only slightly more than the vehicle‘s, you may want to chance it. In that case, it’s a good idea to put some money aside in case you need it if an insurer totals your car.

You may have to continue paying your lease payments until your insurance claim is completely settled.

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The Bottom Line on Gap Insurance

Gap insurance is typically used when you are upside down on a car loan, which means that you still owe more than what the car is actually worth.

If you have gap coverage, it will pay for the difference between the actual value of the car and what you have left to pay on your car loan.

As long as your gap insurance policy covers loss in the case of theft, your stolen vehicle will be eligible for coverage under your gap insurance.

Comprehensive auto  insurance will cover the loss of your vehicle due to theft otherwise, but this is a supplemental policy that is not typically required under state laws. Contact your auto insurance company for further details.

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