Does Gap Insurance Cover Theft?

Last Updated on September 17, 2023

Many drivers carry gap insurance to protect new vehicles. But does gap insurance cover theft?

Most gap insurance covers all total loss situations, including vehicle theft. Whether your vehicle has been stolen or totaled, your gap insurance should cover the value of the vehicle and the amount remaining on your loan or lease.

Keep reading to find out everything you need to know about how gap insurance covers vehicle theft.

Key Takeaways:

  • Gap insurance typically covers vehicle theft and other total loss situations. It fills the gap between the vehicle’s value and the amount remaining on the loan or lease.
  • When a vehicle is stolen and deemed a total loss, the insurance company compensates the owner for the vehicle’s value through comprehensive coverage. If gap insurance is in place, it covers the difference between the amount owed and the vehicle’s value.
  • Gap insurance may already be included in your loan or lease agreement, so it’s important to check if you already have coverage before purchasing additional gap insurance.
  • Factors like a low down payment, long lending period, leasing a vehicle, choosing a fast-depreciating model, or rolling over a previous loan balance into a new purchase make buying gap insurance more advisable. It provides extra protection and peace of mind in these situations.

Yes, Gap Insurance Covers Theft

Most gap insurance policies cover vehicle theft, assuming all other requirements are met.

Gap insurance covers the “gap” between the value of your vehicle and the amount remaining on your loan or lease.

If your new vehicle has been stolen, then you may receive less money for that vehicle than what you owe through your comprehensive coverage. In this case, gap insurance covers the difference in value between the amount you owe and the value of your vehicle.

Gap insurance applies in most total loss situations, including:

  • Total loss accidents, where the cost of repairing the vehicle exceeds the value of the vehicle (or a certain threshold)
  • Theft of the vehicle

How Gap Insurance Works

Gap insurance, also known as Guaranteed Asset Protection (GAP) insurance, covers the difference between the value of your vehicle and the amount remaining on your loan or lease.

Many vehicle loans and leases require gap insurance. It’s common on new vehicles, where the vehicle may be worth significantly less than the amount remaining on your loan or lease.

Let’s say you buy a new SUV for $40,000 with a $5,000 down payment. You drive the SUV home. Three months later, your SUV is stolen from your driveway and never recovered. Your insurance company compensates you based on the actual cash value of the vehicle at the time of the theft, which was $32,000. This is the cost of the vehicle minus depreciation from the first few months of ownership. You still owe the dealer $35,000. There’s a $3,000 “gap” between the value of the vehicle and the amount you owe.

Without gap insurance, you would need to pay this $3,000 difference out of pocket. With gap insurance, your insurer covers the difference.

As your vehicle gets older and you continue to pay off your vehicle, there will be less of a gap between the value of your vehicle and the amount remaining on your loan. Eventually, you can get rid of gap insurance (or your lender or dealership will drop it from your payments).

How Gap Insurance Covers Theft

Gap insurance covers theft similarly to how it covers total loss accidents. If your vehicle is stolen and deemed a total loss (say, if it’s unrecoverable or sustained significant damage during the theft), then you receive compensation from your insurance company.

Here’s how gap insurance covers the theft of a vehicle:

  • Your vehicle is stolen. You have full coverage car insurance, including liability, collision, and comprehensive coverage (as required by your loan). You also have gap coverage.
  • Law enforcement authorities and your insurance company work to recover your stolen vehicle. If your vehicle is unrecoverable, or if the car is recovered and has significant damage, then it may be deemed a total loss. You’ll file a police report, and your insurer may need a copy of that police report.
  • Once your vehicle is deemed a total loss, your insurer compensates you for the value of your vehicle via your comprehensive coverage, which covers theft.
  • If you have a new vehicle and carried gap insurance, you may also receive compensation through your gap insurance policy. Your gap insurance covers the difference between the value of your vehicle and the amount remaining on your loan. If there’s a gap, then gap insurance covers the full value of this gap.
  • Depending on your policy, you may need to pay a deductible. Generally, you pay a comprehensive coverage deductible if your vehicle is stolen. The average comprehensive coverage deductible is $250 to $500 per incident.

You May Already Have Gap Insurance

Many dealerships and lenders require gap insurance as a condition of the loan. In fact, many loans or leases have gap insurance payments built in.

If your new car was stolen, check if you already had gap insurance coverage. If you have gap insurance and made a total loss insurance claim, then this gap insurance will cover the difference in value, if any, between the amount remaining on your loan or lease and the amount you received for your vehicle after the total loss insurance claim.

When to Buy Gap Insurance

Some dealerships and lenders require gap insurance, while others do not. Depending on your situation and aversion to risk, you may or may not want to buy gap insurance.

Some of the situations where you may want to consider gap insurance include:

  • You put less than 20% down on your vehicle.
  • You signed up for a long lending period (say, more than 60 months)
  • You are leasing a vehicle.
  • You purchased a vehicle that depreciates more rapidly than other models.
  • You rolled over a previous loan balance into a new vehicle purchase.
  • You want maximum protection and peace of mind.

In any of these situations, gap insurance could make sense. Like all other types of insurance, gap insurance is about deciding what’s best for you based on budget, aversion to risk, and peace of mind.

How to Buy Gap Insurance

If you decide to buy gap insurance, you have two general options:

Buy from the dealership or lender. Most car dealerships and lenders offer gap insurance, and you can easily add gap insurance to your loan or lease. In fact, it may already be included. This gap insurance may be more expensive than gap insurance you buy from your insurer. However, if your insurer doesn’t offer gap insurance, this may be your only option.

Buy from your insurer or a third-party insurer. Many major insurers offer gap insurance, although some do not. Contact your own personal insurance provider to ask about gap insurance. Generally, they can provide gap insurance cheaper than a dealership or lender. Alternatively, you contact a third-party insurance provider to add gap insurance to your vehicle.

Other Things to Know About Gap Insurance & Vehicle Theft

Every day, drivers across the United States receive gap insurance payouts after vehicle theft.

Some of the other things to know about gap insurance and vehicle theft include:

30-Day Waiting Period May Be Required: Most insurers require a 30-day waiting period before completing a vehicle theft claim. Your car may or may not be recovered during the 30-day waiting period. If your car was stolen, you may need to wait 30 days before receiving any compensation from your insurance company (although your insurance company could cover a rental car during this period).

Police Report Generally Required: Virtually all insurance companies require a police report to file a vehicle theft insurance claim. After your vehicle has been stolen, you need to contact the police and file a police report. Many insurers will refuse to file a stolen vehicle claim without a police report.

Gap Insurance Only Pays If Vehicle is Totaled or Unrecoverable After Theft: Gap insurance only pays if your vehicle is deemed unrecoverable after it’s stolen – or if it is recovered after theft but has experienced significant damage. In both of these situations, your vehicle is considered a total loss. If your vehicle is recovered but did not have significant damage, then gap insurance will not pay.

Final Word: Contact Your Insurer for Gap Insurance & Theft

Gap insurance should cover vehicle theft in most situations. If your vehicle is unrecoverable or has experienced significant damage after theft, then gap insurance should cover the gap, or difference in value, between your vehicle and the amount remaining on your loan or lease.

Contact your insurer for any questions about gap insurance, theft, and how to proceed with your claim.

James Shaffer
James Shaffer James Shaffer is a writer for and a well-seasoned auto insurance industry veteran. He has a deep knowledge of insurance rules and regulations and is passionate about helping drivers save money on auto insurance. He is responsible for researching and writing about anything auto insurance-related. He holds a bachelor's degree from Bentley University and his work has been quoted by NBC News, CNN, and The Washington Post.
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