“Guaranteed asset protection” coverage, otherwise known as “GAP” coverage, is commonly offered by car dealerships and insurance companies as a form of protection in addition to standard collision coverage. GAP is an example of an add-on that car dealerships often include in a contract to buy or finance a car.
GAP comes into play when a car goes through a total loss, whether through a collision or due to theft. After a car has been classified as a total loss, the consumer’s car insurance company calculates the car’s value at the time of total loss and sends payment to the car dealership or the company who owns the car loan. GAP is supposed to cover the “gap” between the value of an existing car loan balance and the car’s value at the time of total loss. When GAP works as it’s supposed to, a car owner who has a car loan might not have to pay for anything after experiencing a total loss.
In Ohio, when GAP is purchased from a car dealership, it is not classified as insurance under state law, so a consumer doesn’t have the same legal protections that they would have if they purchased GAP from a car insurance company.
Sometimes, GAP does not work as expected, which may happen when GAP is purchased from a car dealership. GAP contracts from car dealerships often have a lot of rules, and if those rules aren’t followed, then a consumer’s car might not be fully covered when there is a total loss, and they may not receive the payout that they expected.
Tips to ensure success when dealing with car dealership GAP contracts include:
- maintaining standard car insurance coverage;
- knowing if there are commercial use restrictions in the contract;
- checking if there are maximum coverage amounts (also referred to as waiver amounts) in the contract;
- knowing which company you would need to file a total loss claim with in order to get your GAP payout (this is typically not your standard car insurance company or the dealership where you bought the car, but rather a third-party provider named in your GAP contract);
- keeping all records and documents related to your car purchase and GAP coverage.
If you have experienced a total loss and your GAP is not paying out as you expected, Legal Aid may be able to help. To apply for free legal services, call 888-817-3777 or apply online: lasclev.org/apply.