GAP Insurance

• GAP is short for "guaranteed asset protection," but is commonly called "general auto protection" by car insurance companies. This type of coverage is used to pay the outstanding balance between the loan value of an item and the book value in a situation where the item is considered a total loss. For instance, if your car is totaled and your loan value is higher than book value of the car, GAP coverage would pay the difference between your auto insurance and the remainder of the loan.
  
  

Benefits

• GAP is meant to be used in conjunction with a primary insurance policy, and only serves to bridge the gap between the market value of property and the financed amount, including the interest and finance charges themselves. GAP does not pay anything to the policyholder, but pays directly to the lender or finance company. Auto dealerships will sometimes require anyone financing a vehicle to purchase GAP insurance to protect the investment of the dealership or lending agent.
  
  

Limitations

• If the primary insurance claim is denied, GAP will not pay off the total value of the property. Instead, the GAP coverage is forfeited because it is not a primary coverage and must ride on top of a regular insurance policy to have any value. In this way, the effectiveness of GAP insurance is limited to the dependability of the primary policy. For instance, if your auto insurance lapses, the GAP coverage will lapse as well, regardless of whether it is paid up as an individual policy.
  
  

Disputing a Claims Denial

• If you file a claim that is denied, GAP insurance will not pay for the lost property. However, if you are able to get the denial overturned, your GAP insurance will pay the part of the loan it was purchased for. To get the denial overturned, contact your insurance company and find out the reason for the denial, then ask what steps you can take to get the situation corrected. In some cases, a claim is denied due to incorrect or missing documentation, a situation that is easily corrected by providing the insurance company with the correct data.