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In NU, what should I know about GAP insurance for car loans?
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Car Loan Glossary • nu

In NU, what should I know about GAP insurance for car loans?

In Nunavut, GAP (Guaranteed Asset Protection) insurance is an optional add-on designed to cover the financial "gap" that can arise if your financed vehicle is declared a total loss due to theft or an accident. This coverage pays the difference between your car's Actual Cash Value (ACV) - what your primary auto insurer will pay out - and the remaining balance on your car loan. With new vehicles depreciating rapidly, and given current Canadian market conditions in 2025 featuring higher vehicle prices and longer loan terms, it's common for a car's market value to be significantly less than the outstanding loan balance, especially in the early years of ownership. Without GAP insurance, you would be personally responsible for this shortfall, potentially owing thousands of dollars for a vehicle you no longer possess. While similar to replacement-value auto insurance, which aims to replace the vehicle itself, GAP specifically protects your loan obligation. It's crucial for consumers in NU to carefully review the terms, cost, and exclusions of any GAP policy offered, ensuring it provides genuine value and doesn't duplicate existing coverage, thereby protecting their finances and credit rating in the event of an unforeseen total loss. Always confirm any specific territorial rules regarding its sale or taxation.

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