GAP Insurance vs Self-Insuring Total Loss
**GAP insurance** covers the difference between insurance payout and loan balance after a total loss. **Self-insuring** means keeping cash reserve—works if LTV is low from large down payment.
Step by step
1. Check LTV
Loans over 100% LTV in year one need GAP most.
2. Price GAP
Dealer GAP is often $500-800—credit union policies may be cheaper.
3. Read exclusions
Commercial use or racing may void GAP.
GAP vs self-insure
Extra down payment can replace GAP mathematically.
- GAP insurance: Low premium vs catastrophic shortfall risk.
- Self-insure: Save premium; need liquidity if totaled underwater.
Use our calculators
Common mistakes
- Buying GAP on 20% down loans
- Rolling negative equity without GAP
FAQ
Does GAP cover theft?
Usually yes on total loss claims—verify policy.