Gap Insurance Coverage Calculator
Example: Current loan balance: 28000 $ · Current market value of car: 24000 $ · Insurer payout (% of value): 100 % · Comprehensive/collision deductible: 500 $
| Your out-of-pocket gap | $4,500 |
| Insurer pays you | $23,500 |
| Gap insurance would cover | $4,500 |
Worked example
You owe $28,000 but the car is worth $24,000. If the insurer pays 100% of value minus a $500 deductible, you receive $23,500. You still owe $28,000, so you are left with a $4,500 gap out of pocket on a car you no longer have. That $4,500 is exactly what gap insurance would cover, which is why lenders often require it when you are underwater on the loan.
Frequently asked questions
When do I actually need gap insurance?
You need it whenever your loan balance exceeds the car market value, which is common with low down payments, long loan terms, or fast-depreciating models. If the gap this tool shows is zero or negative, you have equity and gap coverage is unnecessary.
Why might the insurer pay less than the car value?
Payouts are based on actual cash value, which insurers may assess below what you think the car is worth, and your deductible is subtracted. Setting the payout percentage below 100% lets you stress-test a conservative settlement.
Is gap insurance cheaper from my insurer or the dealer?
Buying gap coverage as an add-on to your auto policy is usually far cheaper than the lump-sum version dealers roll into the loan. Compare both, because the dealer version also accrues interest if financed.
Does gap insurance cover my deductible?
Traditionally no, though some policies now include deductible coverage. This tool assumes the deductible reduces the payout, widening the gap. Check whether your gap policy reimburses the deductible as well.