Gap insurance, or Guaranteed Asset Protection insurance, is a type of coverage that helps bridge the “gap” between what you owe on a vehicle loan or lease and its actual cash value (ACV) if your car is totaled or stolen. Standard auto insurance typically pays only the ACV of the car at the time of the incident, which accounts for depreciation. If the remaining loan or lease balance is higher than the ACV, you would have to cover the difference out of pocket unless you have gap insurance. This coverage is especially useful for new cars that depreciate quickly or for buyers who made a small down payment and financed most of the vehicle’s cost. Gap insurance does not cover other expenses like repairs or extended warranties, and it’s often offered through dealerships, lenders, or auto insurers as an optional add-on.