Guaranteed Asset Protection (GAP)
Protect yourself and prepared for the unexpected.
Bridging the gap: Protecting your auto loan investment
Imagine this: you've just experienced a total loss of your vehicle due to an accident or theft. Your primary auto insurance will likely cover the vehicle's Actual Cash Value (ACV) at the time of the incident. However, the ACV – which accounts for depreciation – might be significantly less than the outstanding balance on your auto loan. This difference leaves you in a tough spot, still owing money on a car you can no longer drive.
That's where Guaranteed Asset Protection (GAP) comes in. GAP is a voluntary program designed to help protect you from this potential financial gap. It's not insurance itself, but rather an agreement that can provide significant peace of mind.
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Covers the deficiency: In the event of a total loss or unrecovered theft*, GAP can waive the difference between your primary insurance settlement and the remaining balance on your auto loan. This means you're less likely to be stuck paying off a loan for a vehicle you no longer have.
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Deductible assistance: Many GAP agreements also include coverage for your primary insurance deductible. If there's still a "gap" after your insurance pays out, GAP can cover up to a specified amount of your deductible, further reducing your out-of-pocket expenses.
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Potential for replacement vehicle credit: Some GAP programs, like the GAP Advantage offered here, may also provide a credit (e.g., $1,000) towards financing a replacement vehicle through the same financial institution. This can be a helpful boost when you're already dealing with the stress of replacing your car.
Important things to know about GAP
- Is GAP something I have to get when I take out a car loan?
No, GAP is completely voluntary. It's an optional program you can choose to add for extra financial security.
- Is GAP expensive? How do I know if it's worth the cost?
There is an additional cost for GAP, but it's important to weigh that against the potential financial hit if your car is totaled or stolen and you still owe a lot on the loan. Think about how much you borrowed, the length of your loan, and how quickly your vehicle might depreciate.
- When does GAP make the most sense?
GAP can be particularly helpful if you have a long-term loan, if you didn't put much money down initially, or if you're buying a type of vehicle that tends to lose its value quickly.
- Are all GAP programs the same? Will I get the exact same coverage no matter where I get it?
No, not all GAP agreements are identical. The amount of coverage, whether they help with my insurance deductible, and if they offer a credit for a replacement vehicle can all vary. You need to understand the specifics of any GAP agreement you're considering.
- How do I decide if GAP is right for me?
Think about your own financial situation, the details of my car loan, and how comfortable you are with potential financial risks. Understanding how GAP works will help you make an informed decision.
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*GAP is subject to limitations and exclusions, including a loan-to-value maximum of XX% which may cap the benefit you receive. Guaranteed Asset Protection products are provided by third parties, are not NCUA/NCUSIF insured, and are not Credit Union guaranteed. Discounts may vary and may not be available in all states. Purchase of Guaranteed Asset Protection (GAP) is optional. The purchase of these supplemental coverages will not affect your application for credit or the terms of any existing credit agreement with University Credit Union. Eligibility requirements, conditions, and coverage exclusions may apply. Review your contract for a full explanation of the terms.