New Car Replacement vs. GAP Insurance: What You Need to Know

Purchasing a new car

Are you buying a new car? Here are some helpful tips when deciding whether you need this valuable insurance to protect your new vehicle. 

Our Analysis

TWG - Insurance Data Analytics

New Car Replacement Insurance

Covers the difference between the car’s actual cash value (ACV) and the cost of purchasing the exact car again new, minus your deductible. (Actual Cash Value equals depreciated value.)

Designed to help you replace your totaled car with a new car, if you are eligible.

Helps you replace your totaled vehicle with a brand new one of the same make and model, based on the insurance company’s eligibility requirements and coverage offerings.

Recommended if your car is less than a year old and has less than 15,000 miles, has comprehensive and collision coverage and no previous owners (eligibility requirements vary depending on the insurance company). Also recommended if you live in an area with higher than usual accident risk, i.e., traffic or weather conditions, and/or your car depreciates more quickly than others.

Does not factor in a car’s depreciation into your payout, so you may receive more money than your car’s (depreciated) actual cash value.

GAP Insurance

Covers the difference between the auto loan balance and the car’s actual cash value (ACV) minus your deductible if your car is a total loss. (Actual Cash Value equals depreciated value.)

Designed to ensure you can pay off the old car, if you are eligible. 

Helps cover any remaining balance on your loan or lease after your actual cash value payout.


Recommended when your lender or lessor requires it, or your car depreciates quickly.

Our Actionable Advice

TWH - Landing Page Cube

Call us before you purchase a new car to determine whether new car replacement insurance and/or GAP insurance is recommended and if you qualify.

Purchasing both policies may ensure you have coverage for your loan or lease and be able to replace your vehicle if it gets totaled minus your deductible, based on eligibility requirements and coverage which varies by insurance company.

The Big Takeaway

TWG - Filling Insurance GAP

Only a few insurance companies, like Travelers, offer both New Car Replacement coverage and Loan/Lease Gap coverage in a combined package if needed.

If you have questions or would like a quote for this coverage, please contact Kristi Flynn.

Ready to learn more about what The Whitlock Group can do for you? Visit our website to learn more about us and our commercial and personal lines insurance.