Gap Insurance in Arkansas: What It Covers and When You Need It
If your car is totaled while you owe more than it is worth, your auto policy pays the car’s value and you still owe the rest. Gap coverage closes that difference. In Arkansas it is sold two ways, under two different sets of rules, and one of them comes with refund rights many buyers never hear about.
What does gap insurance cover?
Gap covers the shortfall between what your auto policy pays after a total loss and what your lender says you still owe. It does nothing until the car is totaled or stolen and not recovered.
Where the shortfall comes from
After a total loss, your collision or comprehensive coverage pays the car’s actual cash value: its worth immediately before the loss, minus your deductible. Your lender wants the loan balance. Those two numbers are rarely the same in the early years of a loan.
Why the balance runs ahead of the value
A new car loses value fastest early on, while a loan with a small down payment pays down slowly at first. For a stretch measured in years, you can owe more than the car is worth. Total it during that stretch and the difference is yours.
What gap usually does not cover
Gap generally will not pay missed payments, late fees or other amounts you were already behind on. Whether it covers your deductible varies. Service contracts or other add-ons rolled into the loan may or may not count toward the covered balance. Read the specific contract.
It needs collision and comprehensive to work
Gap pays the difference after your own physical damage coverage settles the claim. Without collision and comprehensive on the policy, there is no settlement for gap to sit on top of. Our full-coverage car insurance guide explains those coverages.
Leased cars may already have it
Many leases include gap protection in the lease terms. Check your lease agreement before buying a second layer.
Is a dealer GAP waiver the same as gap insurance from your insurer?
No. Arkansas law treats them differently. Both can be legitimate, and which fits better depends on your loan and how long you plan to keep the car.
| Dealer or lender GAP waiver | Gap coverage from your insurer | |
|---|---|---|
| What it is | A contract that forgives part of the loan balance, part of or attached to the finance agreement | Coverage added to your auto policy |
| Is it insurance? | No. Arkansas law says GAP waivers are not insurance and exempts them from the state’s insurance laws | Yes, regulated as insurance |
| Governing law | Arkansas GAP Waiver Act, Ark. Code § 4-90-801 and following | Arkansas insurance code and the policy terms |
| How you pay | Often a single price added to the loan, so you can pay interest on it | Added to your premium |
| Cost comparison | The required disclosure says its cost is not regulated | Often much less than buying it from a dealer, according to the Insurance Information Institute |
| Removing it | Cancel in writing under the waiver’s terms | Ask your insurance company to remove it |
Can you cancel a dealer GAP waiver and get money back in Arkansas?
Often, yes. Arkansas’s GAP Waiver Act, passed in 2019, sets a free look period of at least 30 days and a refund of the unearned portion when the waiver is cancelled or the loan ends early, less a cancellation fee capped at $75.
The free look period
If the waiver is cancelable and you cancel within the free look period, you are entitled to a full refund of the purchase price, as long as no benefits have been paid. The statute sets that period at no less than 30 days from when the waiver takes effect.
After the free look period
If you cancel later, or the finance agreement ends early, and no benefits have been paid, you are entitled to the unearned portion of what you paid, less any cancellation fee in the waiver. That fee cannot exceed $75. Some waivers are not cancelable after the free look period, so read yours, but an early end to the loan still triggers the refund rule.
Send written notice within 90 days
Make the request in writing to the creditor, administrator or other party named in the waiver. If the request follows an early end to the loan, such as a payoff, refinance or trade-in, notice must go within 90 days of that event. The creditor may apply the refund to any balance still owed.
GAP cannot be a condition of your loan
Arkansas law says the waiver cannot be required to get credit, to set the loan terms, or to buy or lease the car, and the waiver must say so. If you were told financing depended on it, that is not how the statute reads.
Do you need gap insurance on your car?
You need it only while you owe more than the car is worth. These situations make that more likely.
A small down payment or a long loan
Little money down, or a loan term stretched over many years, keeps the balance high while the value falls. This is a common way a new car buyer ends up owing more than the car is worth.
Negative equity rolled in
If you traded in a car you still owed money on and the remaining balance was added to this loan, you started the new loan already behind.
High mileage or a fast-depreciating model
Heavy commuting, such as daily I-49 driving between Springdale and Fayetteville, pushes value down faster than the balance. Some models also lose value faster than others.
When you probably do not need it
If you paid cash, made a large down payment, or are well into a short loan, you likely have equity already. Gap would be insuring a shortfall that does not exist.
When should you drop gap insurance?
Gap has a natural end date. Once the car is worth more than you owe, the gap is gone and so is the reason to pay for it.
- Get your payoff amount.
Ask your lender for the current payoff figure, not the remaining total of payments.
- Check the car’s value.
Look up current market value for your year, model, mileage and condition.
- Compare the two.
When the value exceeds the payoff, you have equity and gap no longer has a job.
- Remove or cancel it.
For gap on your auto policy, ask your insurance company to remove it. For a dealer waiver, send written notice to the party named in the waiver and request any unearned refund.
- Check after a payoff or trade.
If you paid off, refinanced or traded a financed car in the last 90 days and bought a dealer GAP waiver, a written refund request may still be on time.
Find out whether gap still makes sense for your loan.
Cribb Insurance Group is an independent agency in Bentonville serving Northwest Arkansas. We compare gap coverage from multiple insurance companies, check it against your loan payoff and the car’s value, and point out when it is time to take it off. We also help you read what a dealer waiver does and does not include.
Ask Cribby about gap coverage
Cribby is Cribb Insurance Group’s AI assistant for general insurance questions. Start with one of these, or ask your own. For your own policy, talk with our team.
Want to see what your current policy says? Upload your declarations page to Coverage Compare. It shows whether gap or loan payoff coverage is on your auto policy, alongside the collision and comprehensive coverage it depends on.
Use Coverage CompareGap insurance questions
What is gap insurance?
Gap insurance pays the difference between your car’s actual cash value and what you still owe on the loan or lease if the car is totaled or stolen and not recovered. Your auto policy pays the car’s value, and gap covers the remaining balance above that figure, subject to the contract’s terms.
Do I need gap insurance?
Only while you owe more than the car is worth. That is common with a small down payment, a long loan term, a fast-depreciating model, high mileage, or negative equity rolled in from a previous car. Many leases already include gap protection. If you have equity in the car, you do not need it.
Is a dealer GAP waiver the same as gap insurance?
No. Arkansas law says a GAP waiver sold with vehicle financing is not insurance and exempts it from the state’s insurance laws. It is governed by the Arkansas GAP Waiver Act, Ark. Code § 4-90-801 and following, outside the insurance code. Gap coverage added to your auto policy is insurance and is regulated as insurance.
Can I cancel a dealer GAP waiver and get money back in Arkansas?
If the waiver is cancelable, canceling in the free look period of at least 30 days brings a full refund if no benefits were paid. After that, cancellation or an early end to the loan brings a refund of the unearned portion, less a cancellation fee of no more than $75. Request it in writing.
How long do I have to ask for a GAP refund after paying off my loan?
If you are canceling because the finance agreement ended early, such as a payoff, refinance or trade-in, Arkansas law requires written notice within 90 days of the event that ended it. Send it to the creditor, administrator or other party named in the waiver.
Can a dealer require me to buy GAP to get financing?
No. Arkansas law says a GAP waiver cannot be a condition of getting credit, of the loan terms, or of buying or leasing the car, and the waiver must disclose that. The CFPB also lists GAP among optional add-on products you can decline.
Is gap from my insurer cheaper than a dealer waiver?
Often. The Insurance Information Institute says adding gap to your auto policy is usually much cheaper than buying it from a dealer or leasing company. Financing a dealer waiver also means paying interest on it. Compare the price and the terms of both before you sign.
Sources we checked for this guide:
- Ark. Code § 4-90-801, GAP waivers are not insurance
- Ark. Code § 4-90-802, definitions and free look period
- Ark. Code § 4-90-803, requirements for offering GAP waivers
- Ark. Code § 4-90-805, required disclosures
- Ark. Code § 4-90-806, cancellation and refunds
- CFPB: What is GAP insurance and do I need it?
- Insurance Information Institute: what a basic auto policy covers
Insurance answers you can understand. From a local agency you can know.
We believe good insurance decisions start with clear information. Our Northwest Arkansas insurance guides explain coverage, pricing considerations and policy differences in everyday language, so you can shop with greater confidence.
Not sure whether you are upside down?
Send us your loan payoff and your current declarations page, or start a quote. We will show whether gap still fits, how gap on your auto policy compares across multiple insurance companies, and whether you are paying for protection you no longer need.
A quote is an estimate. It is not a guarantee of final premium, coverage or eligibility. The insurance company sets the actual rate and the actual coverage terms after its underwriting review, and they may differ from any figure shown here. Cribb Insurance Group Inc is an independent insurance agency, not an insurance company. Your insurance company issues the policy and pays covered claims. Coverage cannot be bound, changed or cancelled through this website, email, social media or voicemail, and is not in force until Cribb Insurance Group Inc or the insurance company confirms it in writing. Coverage, eligibility, discounts and prices vary by insurance company, policy and individual situation. Cribb Insurance Group Inc, 1601 SW Regional Airport Blvd, Bentonville, AR 72713, (479) 286-1066.