When you purchase a car, it begins to depreciate almost immediately. In simple terms, the book value of your vehicle is lower than the amount you owe for the loan. If you are involved in an accident and the car is stolen, your insurance company will settle for the depreciated, or book value and you responsible for the balance owed on the vehicle.
General Auto Protection, or GAP, is an insurance rider that will pay the lender the difference between your policy settlement and the amount actually owed. It does not pay you, the policyholder, anything. The purpose of GAP coverage is to prevent you from financial difficulties arising from owing money for a car that you no longer have any use for.
If you are not financing the vehicle, GAP coverage has very little to offer you. But many lenders make the coverage a mandatory condition of the car loan, just be certain they can recoup their investment no matter what happens to the car itself. If you drive a car with a relatively low value, it may be in your best interest to accept the potential loss rather than pay higher insurance rates for something you may never need at all. As a rule, buy it when the lender requires, but not if there are no loans or liens attached to the title.
Before you add GAP coverage to your current policy, take the time to get a few online car insurance quotes. Online car insurance quotes give you a chance to compare identical coverage across more than one issuing company, and that lets you see where the best insurance prices can be had without comprising on the coverage, such as GAP insurance, that you need to have.