It’s an unfortunate truth that there’s no way to predict when you might be involved in an accident or become a victim of auto theft. If it happens shortly after you’ve purchased your vehicle, you could be left owing money on a totaled car—unless you have Guaranteed Asset Protection (GAP) to protect you.
How Does GAP Work and What Does it Protect?
GAP is an optional form of additional protection you can get for an auto loan or other collateralized loan to help pay off the difference between what the collateral is worth and what you still owe in the event it is stolen or totaled. Although GAP is most commonly purchased with auto loans, it is also available for motorcycle, snowmachine, boat, ATV, and RV loans.
It’s not uncommon for an outstanding loan balance to be significantly higher than a vehicle’s actual cash value, especially during the first few years of the loan. If your vehicle is totaled in an accident or stolen, your primary insurance settlement will be based on its actual cash value, not the outstanding loan balance. This may create a deficiency balance, or “gap,” that you would have to pay out of your own pocket. When you purchase GAP, that deficiency is eliminated.
Here’s When You Might Need GAP
We asked Alaska USA Insurance Services Manager Lynn Stuhr how to figure out when getting GAP is the right move.
"We generally don't recommend GAP to members if the Combined Loan to Value (CLTV) of your collateral is less than 70%," said Lynn. "At that point the equity you have in your collateral would likely outweigh the benefit of GAP.”
Calculating your CLTV is easy. Look up your vehicle in the Quick NADA Pricing Guide to find its estimated collateral value, then divide the remaining loan amount by the collateral value. The answer will be in decimal form, so you’re looking for something above 0.70.
How Does GAP Work If My Car Is Totaled?
Alaska USA members will need to provide a copy of the finalized insurance settlement to the Insurance Services department within 30 days of receiving it from your insurance company. In the event of an unrecovered vehicle theft, you’ll also need to include a copy of the police report.
Is GAP Worth the Money?
GAP can not only potentially save you thousands of dollars of unexpected costs, it can provide you with the peace of mind of knowing the money you’ve invested in your vehicle is protected.
- GAP is a one-time fee, only $345 for most vehicles and just $445–$545 for RVs—and you can easily add it to your loan.
- Your monthly loan payment stays the same. The cost of GAP is added to your loan and the length of your loan is simply extended (note: you may pay additional interest over the life of the loan).
You may want to consider GAP if:
- Your loan term is more than 48 months.
- You drive your car more than the average person, causing it to decrease in value faster.
- You put a low—or no—down payment on the vehicle.
Where Can I Get GAP?
At Alaska USA, we offer affordable GAP on a variety of different vehicle loans. If you've recently financed a car, truck, motorcycle, or recreational type vehicle through Alaska USA, you may still be eligible to add GAP. Get started by visiting any branch or by giving Insurance Services a call at 907-264-4700.
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