Gap insurance, or Guaranteed Asset Protection insurance, covers the difference between what you owe on your car loan or lease and the car’s actual cash value if it’s totaled or stolen. Standard auto insurance only pays the current market value of the car, which can be much less than your outstanding loan balance due to depreciation. You’d need gap insurance if you’ve made a small down payment, have a long loan term, rolled negative equity from a previous car loan into your current one, or if your vehicle depreciates quickly. Without gap insurance, you could end up owing thousands out of pocket for a car you no longer have. It’s especially useful in the first few years after purchasing a new vehicle, when depreciation is steepest. Gap insurance is typically offered by dealerships, lenders, or insurers, and may be included in lease agreements or purchased separately. It’s optional but highly recommended in specific cases.