Gap coverage generally pays the difference between what you owe on the loan or lease and your insurer’s payout for a totaled or stolen car, but only up to whatever cap and exclusions your specific contract sets. Some products cap the payment at a percentage of the car’s value, some set a flat dollar maximum, and many subtract certain costs, like overdue payments or negative equity rolled over from an earlier loan, before they pay anything.
Because caps and exclusions vary so much by provider, the number that matters is the one printed in your own contract, not a rule of thumb. Here is what several insurers, a lender, and one state law actually publish, plus what commonly gets subtracted first.
If you aren’t sure what you have, first make sure you have gap insurance and which kind, since insurer endorsements and dealer or lender waivers do not always publish the same caps.
Key Takeaways
- Published caps vary by provider. Progressive’s loan and lease payoff coverage tops out at 25% of the vehicle’s value (the limit can vary by state); Navy Federal caps its GAP program’s total payout at $50,000.
- Gap products commonly exclude negative equity rolled over from a previous loan, along with overdue payments, unpaid finance charges, and optional add-ons like extended warranties.
- Whether gap covers your deductible depends on the product. Some lender GAP programs cover up to $1,000 of it; several major insurers do not cover the deductible at all.
- Gap only pays when a real shortfall remains after your insurance settlement and after any exclusions are subtracted. It does not pay simply because a car was totaled.
How Much Gap Actually Pays
After a total loss, your collision or comprehensive coverage first pays the car’s actual cash value, minus your deductible, and that payment generally goes to the lender before you see any of it. Gap coverage is built to cover some or all of whatever loan or lease balance is still left after that payment, often called the shortfall.
Whether gap covers all, some, or none of that shortfall depends on two things: any cap your specific contract sets, and any exclusions that reduce what counts toward the shortfall in the first place. Both vary by provider.
Caps Some Providers Publish
Some providers publish a specific payout cap and others don’t. Progressive’s loan and lease payoff coverage pays up to 25% of the vehicle’s value, while Liberty Mutual describes paying the difference, minus any deductible, without naming a separate cap. The table below summarizes what each source states.
| Provider | What It Publishes |
|---|---|
| Progressive (loan/lease payoff) | Pays the difference in value and what’s owed, up to 25% of the vehicle’s value; the limit can vary by state |
| Navy Federal Credit Union (GAP) | Total payout capped at $50,000 |
| Liberty Mutual | Pays the difference, minus any deductible. No percent or dollar cap stated on its gap page |
| California law (Civ. Code 2982.12) | No payout cap. If your loan exceeds a waiver’s maximum loan-to-value limit, that limit must be clearly disclosed and you must be told in writing |
California law doesn’t cap the payout. It regulates waivers that carry their own loan-to-value limit: if your loan is above that limit, the waiver can only be sold if the limit is conspicuously disclosed and you’re told in writing that your loan exceeds it. If your own insurer or lender doesn’t publish numbers like these, ask for the payout formula and any maximum in writing before you rely on it.
What Gets Subtracted or Excluded First
Even before any cap applies, many gap products subtract certain costs from the shortfall they will consider. The Texas Department of Insurance lists overdue payments, unpaid finance charges, warranty costs, balloon payments, your deductible, and damage from a previous accident as common reductions.
Rolled-over negative equity, meaning what you still owed on a trade-in before this loan, is excluded by name in gap explanations from Progressive, State Farm, and Ally. Progressive also won’t pay for optional products such as vehicle service contracts, and Ally singles out late fees as something gap won’t cover. RateFrog’s article on Progressive’s loan/lease payoff coverage shows how its 25% cap works in a total loss.
The deductible is the exception worth double-checking yourself. State Farm, Nationwide, and Liberty Mutual all describe their gap coverage as not paying the deductible.
Navy Federal and Ally, by contrast, say their own GAP programs will cover up to $1,000 of the deductible where state law allows. Ask your own provider directly rather than assuming either way.
Hypothetical Example: How Exclusions Change the Payment
Hypothetical example: Suppose a totaled car has an actual cash value of $18,000 and the driver has a $500 deductible, so the insurer’s settlement to the lender is $17,500. The driver still owes $23,000 on the loan, and $2,000 of that is negative equity rolled over from a previous car. These numbers only illustrate the math. They aren’t quotes or typical values.
After the settlement, $5,500 of the loan is still unpaid. That shortfall has three parts: the $2,000 rollover, the $500 deductible, and $3,000 of loan balance above the car’s value. A gap product that excludes the rollover and doesn’t cover the deductible would pay $3,000, leaving the driver to pay $2,500. One that also covers the deductible, as Navy Federal’s and Ally’s programs can up to $1,000, would pay $3,500, leaving the driver the $2,000 rollover.
If you are still weighing whether to carry gap coverage at all, our guide to whether gap insurance is worth it covers that decision. If you want to know when gap pays nothing at all rather than a reduced amount, see reasons gap insurance might not pay.