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

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

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Zaneta Wood, Ed.S. has over 15 years of experience in research and technical writing bringing a keen understanding of data analysis and information synthesis to reach a wide variety of audiences. She studied adult education and instructional technology at Appalachian State University as well as technical and professional communication at East Carolina University. Zaneta has prepared technical p...

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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®

UPDATED: Jul 30, 2020

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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.

If you leased 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 paying additional amounts on your car loan if your vehicle is stolen.

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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 cap insurance with collision 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, 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 negative equity from a separate vehicle into a new car 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.

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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.

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.

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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 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.

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