Gap insurance is often misunderstood, particularly because it is is not talked about as often as other insurance type products like car insurance or a vehicle service contract.
With that being said we’re going to try to clear up some of the confusion, along with answering the big question: does gap insurance cover transmission repairs?
What Is Gap Insurance?
Carinsurance.com does a great job of describing what gap insurance is:
If your car is totaled or stolen, gap insurance coverage will pay the difference between the actual cash value (ACV) of the vehicle and the current outstanding balance on your loan or lease. Sometimes it will also pay your regular insurance deductible.
Car owners often assume that if their car is totaled, it will be replaced at the amount they paid, or at least the amount they owe. This is not so. That is why many car insurance companies offer gap insurance (or loan/lease payoff insurance) as an optional coverage. You must also have comprehensive and collision insurance to buy gap coverage, but if you lease or finance your car, those are typically required.
If your insurer totals your vehicle by a covered peril, such as an accident, theft, fire, flood, tornado, vandalism, or hurricane, the insurer will pay you the actual cash value for your car, if you have comprehensive and collision insurance. This amount is often considerably less than the amount you still owe on your loan or the amount due for a lease payoff.
When the amount of your ACV payout is less than what you owe on your lease or loan, the loss from this financial shortfall is the “gap” you can be left owing. This is where gap coverage comes into play.
The reason gap insurance is so important is because of depreciation. Depreciation
Let’s say you buy your car when it’s worth $30,000 dollars new. You take out a 72-month loan for the entire purchase price of $30,000 and then drive away.
1 years later, your car gets totaled. Let’s say you still owe $28,000 on your loan.
On average, most new cars lose about 20% of their value over the first year of ownership.
This means your $30,000 dollar car is only worth $24,000, which is what your car insurance will pay you. Without gap insurance, you will still owe the company that wrote your loan $4,000.
What Does Gap Insurance Cover?

Now that we have a better understanding of what gap insurance is, we can get into what it covers.
Gap insurance covers the difference between the market value of your car (which insurance will pay you if your car is totaled) and what you owe on your loan.
In other words, we can define what gap insurance covers as:
Gap Insurance Payout = (Amount Owed On Your Car Loan) – (Market Value Of Your Car)
Gap insurance does not cover specific parts. It covers the gap between what you owe on your car and the market value of it.
Do I Need Gap Insurance If I Have Full Coverage Insurance?
Regardless of what type of car insurance you have, Gap Insurance can still be useful.
This is because full coverage insurance will only pay you the market value for your car when it is totaled. The insurance company does not care about what you owe, it only cares about what your car is worth.
Does Gap Insurance Cover Transmission Repairs?
Gap insurance does not cover transmission repairs. Gap coverage is only meant to cover the difference between what you owe on your car, and what insurance pays you.
Even if your car is totaled because your transmission will cost more to repair then what your car is worth, gap insurance will only pay you the difference between what you owe on your car and the car’s actual value.
Luckily though, there is another option if you are looking to get your transmission covered or worried that is will break in the near future.
Protect My Car Covers Transmission Repairs
So here’s the good news: a vehicle service contract from Protect My Car will absolutely cover your transmission repair.

As you can see, all of our vehicle service contract plans include coverage for your transmission, even though gap insurance does not cover it.
That means when your car needs a transmission repair (or god forbid a new transmisson), you won’t have to worry about how you are going to pay the $1,000-$3,000+ that it can cost to fix your transmission.
That’s right. Protect My Car will pay for your transmission. You only pay between $100-$200 and we pay the rest.
Sound like a fair trade?
Plus, you’ll also get coverage for:
- Engine
- Transfer Case
- Drive Axle
- Front/Rear Suspension
- Air Conditioning and Heating (you do NOT want to be without these)
- Electrical
- …and so much more.
This is in addition to free oil changes and tire rotations, plus a free rental while your car is in the shop AND your hotel and meals paid for if you are away from your house.
Not to mention the free 24/7 roadside assistance that always has your back whether you get locked out or you break down on the side of the road.
Don’t wait for your car to break down or for your transmission to fail. Fill out the form below and click the “Get Quote” button to see how easy it is to start saving thousands on your car repairs, including your transmission.
Because even though it sucks that gap insurance does not cover your transmission, we do.