Guaranteed auto protection or GAP insurance protects individuals who lease vehicles. If the vehicle is damaged or stolen during the course of the lease, the GAP coverage goes into effect.
As an example, if your car was stolen and not recovered, your insurance company might say that your car was worth $17,000 based on current used car prices. The payoff on your lease might be $20,000. Without GAP Insurance you would be responsible for that $3,000 difference.
It’s common in a lease to be in this negative equity position. Many dealers will try to sell you GAP coverage for about $500. But even though it sounds like a good idea, be wary!
You don’t want to pay the car dealer what amounts to a huge premium just to print a form. Many lease companies include GAP insurance with their lease agreements at no additional cost. Also, many insurance companies will now let you pick up GAP coverage or Auto Loan/Lease Pay-off coverage for a small fee (about $40 per year) on your regular auto insurance.