As a result of depreciation during the first few years that you own your vehicle, your loan balance can be higher than the actual value of your car. As your car’s value declines, your loan balance can be significantly higher, leaving a gap between the value of your car and the amount you still owe on it.
If your car were stolen or totaled in an accident, you may assume the car insurance you have is sufficient to cover the losses. However, when a vehicle is declared a total loss, your car insurance settlement will generally pay the market value of the vehicle less the insurance deductible. This amount may be substantially less than the balance due on the loan. You would then be liable to pay the difference between your insurance settlement and your outstanding loan balance. This is where GAP steps in.
GAP covers the deficiency balance between the market value of your vehicle plus the insurance deductible (up to $1,000) and the loan balance you still owe. By having GAP Protection, you avoid having to pay the remainder of your loan balance if your car were to be stolen or totaled.
GAP is a flat amount that may be amortized over the life of the loan and figured directly in with your GECU loan payment.
