Skip to main content

«  View All Posts

Auto Buying

Understanding GAP Insurance

November 7th, 2023 | 8 min. read

Understanding GAP Insurance

Print/Save as PDF

When you purchase a car, you might take out a loan to cover the cost. However, as soon as you hit the road, the value of your car starts to depreciate. Now, let's say your car gets stolen or is damaged beyond repair. You file a claim with your primary auto insurance provider, and they cover the car's current market value, which is the amount your car was worth right before the unfortunate incident.

But here's the catch - what if the market value of your car is less than what you still owe on your loan? This leaves you with a 'gap' that you'd have to pay out of pocket. That's where Guaranteed Asset Protection (GAP) insurance steps in!


Umbrella-Iconwhat is gap insurance?

Guaranteed Asset Protection (GAP) insurance is essentially extra insurance from your lender to cover the difference between the actual cash value of your vehicle and the outstanding loan balance you owe in the event of an accident or theft. It comes into play when your regular auto insurance payout doesn't fully cover the remaining amount you owe on your car loan.


here's a quick look at what we'll cover



when do you use gap insurance?  

Even if something unexpected happens to your car, with GAP insurance, you won't be left grappling with a hefty car loan for a vehicle you can no longer use.

Here's a quick look at how much auto insurance would cover and what GAP insurance cover if your vehicle was deemed a total loss and you still owed $25,000 on your auto loan. 

how GAP works 3


what vehicles does GAP insurance at Skyla cover? 
  • Autos
  • Light Trucks
  • Motorcycles
  • ATVs 
  • Power Sport Vehicles
  • Small watercraft 
  • Larger Boats/RVs/Travel Trailers 
  • Commercial Vehicles 
DEFINITION: A commercial vehicle is one used mainly for business. It's typically owned and insured by a company, may display the company's name, and could be listed in commercial vehicle guides. Even if owned by an individual, it can be considered commercial if it's primarily used for work.


Auto-Loans-Iconwhy would i need gap insurance?

  • High loan-to-value ratio (LTV): This means you borrowed a lot of money to buy your car, and you still owe a lot compared to what your car is currently worth.
  • Long-term car loan: If you decide to pay off your car over a long time (like more than 4 years), you could end up owing more money than what your car is worth at some point. This is because cars lose value over time.
  • Small down payment: If you only paid a little bit of money upfront (a small down payment), then you probably had to borrow more through your auto loan. Again, this could mean that at some point, you owe more than what your car is worth.
  • Regularly driving your car for long distances: If you often drive far distances, your car's value may depreciate faster due to the high mileage. This could lead to a situation where you owe more on your loan than what the car is worth.
  • Selecting a vehicle with high mileage:  If you bought a car that already had high mileage, its value will likely decrease faster than your loan balance. This increases the chance of owing more on your loan than the car's value.

In these cases, GAP insurance can be really helpful.  If your car gets stolen or is so damaged it can't be fixed, your regular car insurance will only pay you what the car was worth just before it got stolen or damaged. But if you owe more on your loan than that, you'd have to pay the difference yourself. GAP insurance covers this 'gap' and pays that difference for you. So it can save you from having to pay a lot of money out of pocket.


Paying-Money-Icondoes it cost to have gap insurance?

Yes, there is a cost associated with GAP insurance. However, at Skyla, this cost can be conveniently financed into your loan or paid out of pocket for only $550.

QUICK TIP: Our lending specialists are always ready to help you understand why your specific loan might benefit from GAP coverage.


pros and cons to gap insurance?




are there common misconceptions about gap insurance?
  • GAP insurance is a replacement for standard auto insurance:  This is a common misconception and not the case; GAP insurance is an additional coverage that works in tandem with your auto insurance.
  •  GAP insurance covers any missed car payments due to financial hardship, unemployment, or medical issues: Nope! GAP insurance only covers the difference between the value of your car and the amount you owe on your car loan in the event of total loss or theft.


Quick Rules to remember for GAP Insurance
  • GAP protects the loan, not the vehicle: GAP insurance is designed to cover the amount you owe on your loan if your vehicle is totaled or stolen, not the vehicle itself.
  • GAP can be purchased at any time: You can decide to buy GAP insurance whenever you want, it's not limited to when you first get your loan.
  • GAP is fully refundable within 60 days of loan closing, non-refundable after 60 days: If you decide you don't want the GAP insurance, you can get a full refund within 60 days of closing your loan. After that period, you cannot get a refund.
  • GAP does not pay for additional funds, or late/skip fees added to loan balance: Any extra charges like late fees or skipped payment penalties added to your loan won't be covered by GAP insurance.
  • GAP does not pay for interest charged after date of loss: If your vehicle is totaled or stolen, GAP insurance won't cover any interest that accrues on your loan after that date.

ready for gap insurance?skyla-article-conclusion2 

Feeling like it's time to add GAP insurance to your financial utility belt? Here's what you can do next:

  • Reach out to our team at Skyla Credit Union. Our lending specialists are ready to answer all your questions and guide you through the process of securing GAP insurance.
  • Take advantage of the Skyla GAP Plus benefit. If you finance your next vehicle with Skyla within 90 days of your GAP claim being paid, we'll give you $1,000 towards your new vehicle.
With GAP insurance, you'll be prepared for whatever life throws your way. Let's conquer this adventure together!
I'm Ready for GAP 

 Have a question? CHAT WITH AN EXPERT!

Our Customer Service Representatives are here for you and ready to assist! You can get in touch with us here or call us at 704.375.0183



As the Content Specialist and author of the Learning & Guidance Center, Yanna enjoys motivating others by uncovering all that's possible in the world of finance. From financial tips and tricks to ultimate guides and comparison charts, she is obsessed with finding ways to help readers excel in their journey towards financial freedom.

learning & guidance

more resources to get you ready to roll

Auto Loan Refinance: What’s the Best Option for Me?

Explore your best options for auto loan refinance. Improve rates, lower payments, and upgrade for savings. Comprehensive guide inside

16 min. read

What Happens After I Pay Off My Auto Loan?

Don't know what happens after you make you last payment on your auto loan? Here's that process of getting your title and learn how to manage your funds. 

10 min. read

Join our Mailing List & get articles sent straight to your inbox