Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insuranc...

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Melanie Musson is the fourth generation in her family to work in the insurance industry. She grew up with insurance talk as part of her everyday conversation and has studied to gain an in-depth knowledge of state-specific insurance laws and dynamics as well as a broad understanding of how insurance fits into every person’s life, from budgets to coverage levels. Through her years working in th...

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Reviewed by Melanie Musson
Published Insurance Expert Melanie Musson

UPDATED: Mar 29, 2022

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Just What's Essential

  • CarMax offers Guaranteed Asset Protection (GAP) insurance to all clients who purchased a vehicle at any of its 233 stores
  • CarMax GAP insurance is best used for high interest or low down payment financing
  • GAP insurance with CarMax typically costs $30 a year and must be purchased at the time of financing your vehicle with CarMax

CarMax is the largest used car company in the United States and sells more than 750,000 cars a year. For its customers who finance directly with the company, CarMax offers GAP insurance for roughly $30 a year. When you combine CarMax GAP insurance with affordable car insurance, you will be better protected from any future theft, accident, or natural disaster.

If you have a high-interest loan, low down payment, or a longer finance term it is much more likely that you will owe more on the vehicle than it is worth. If you’re purchasing through CarMax, the company’s GAP insurance will ensure you don’t owe on your vehicle if it’s a total loss. 

How Does CarMax’s GAP Insurance Work?

First off, CarMax does not offer its GAP insurance for anyone. To get CarMax GAP insurance coverage, you must buy a vehicle through one of its local stores and finance with CarMax.

CarMax will offer and sell you GAP insurance, but it does not manage the coverage once it is purchased. CarMax utilizes Safe-Guard Products LLC. to manage all GAP insurance claims, payments, and customer support.

When to Buy CarMax GAP Insurance

The CarMax GAP insurance also must be purchased within seven days of financing your vehicle. In some reports online, CarMax sales reps have stated customers had 90 days to purchase GAP insurance. There have been several accounts where customers returned to purchase the GAP insurance and they were unable to buy it because it was past the seven-day window. Be sure to opt-in for the CarMax GAP insurance on the same day you finance your vehicle.

It’s also important to note, CarMax MaxCare is not the same thing as its GAP insurance. MaxCare is an extended service plan only. 

Choosing Yearly or Monthly Premiums

The CarMax Gap insurance is only available on a yearly plan and cannot be paid on a month-to-month term. You will be able to purchase the coverage for the first year when you complete your financing. The premium in the subsequent years will be owed every year until you are done financing your vehicle.

Filing a Claim With CarMax GAP Insurance

Once you have purchased your vehicle with CarMax, and you have opted to purchase GAP insurance, your vehicle will be registered with Safe-Guard using the Vehicle Identification Number (VIN). You’ll also need to have your comprehensive or collision insurance in place.

The optimal goal would be to drive your vehicle without any problems, accidents, natural disasters, or theft. But this is the real world. If you have a claim you will need to go to the Safe-Guard/CarMax GAP insurance website and submit a claim. You’ll be asked for your name, phone, car make and model, and VIN. 

CarMax GAP Insurance After Purchase

Don’t plan on your CarMax sales rep to have much involvement after the sale of your vehicle with your GAP insurance. Unlike a typical insurance rep, CarMax only offers the coverage and does not directly manage your GAP insurance. Be aware if you want to talk to a customer sales rep regarding your GAP insurance, they may not be able to help you.

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What Does CarMax GAP Insurance Cover?

When you’re at the CarMax finance department’s desk, it’s most likely you’ll be offered GAP insurance. But what does it cover?

With CarMax GAP insurance you get coverage for a total loss due to:

  • Fire
  • Theft
  • Accidents
  • Hurricanes
  • Flooding
  • Tornados

If any of these happen to your car and it is a total loss, CarMax GAP insurance will pay the difference on what you owe if the insurance payout is less than that amount.

What Isn’t Covered by CarMax GAP Insurance?

While it seems like you are covering a large scope of potential problems that could occur to your vehicle, CarMax GAP insurance will not cover everything.

This includes:

  • Repairs to your vehicle
  • Extended warranties for car loans
  • Rental cars while your vehicle is being fixed
  • A down payment on a new car
  • Carry-over balances on any loans you rolled over into your new car loan
  • The diminished value of your car after an accident
  • Car payments not being met because of loss of employment, financial hardship, disability, or death

GAP insurance only covers the difference between what the car is worth and what you owe in a total loss.

What is GAP Insurance?

No matter what car you buy, it will lose its value over time. Wear and tear, accidents, and the overall age of the vehicle will cause the value to decrease. When you lease or finance your car, the amount you owe on a car can be higher than the car’s actual value.

That means if your car becomes undrivable in an accident, is stolen, or is damaged by natural disasters you could still be paying for your car even though you can’t use the car. With GAP insurance the remaining balance owed is covered by the GAP insurance provider.

GAP insurance is a great option to make sure you’re not paying for a vehicle you no longer have, even if you are upside down on the loan.

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Do you need GAP Insurance?

When purchasing a vehicle it is important to review your monthly payment. What affects your payment? There are a variety of different financing options available when you purchase your car. A down payment is the amount of cash offered upfront for purchasing a vehicle. This will reduce the amount you pay per month. In addition, your interest rate and the financing term will also change how much you owe per month.

With GAP Insurance you are better covered if you have a high-interest loan, zero or low down payment, or you have a longer finance term over 60 months. Depending on your financing, some companies will require GAP insurance.

With car prices increasing with newer and more advanced vehicles, GAP insurance has become a standard for the car insurance industry. Be prepared for it to be discussed with your new or used vehicle financing. In addition, several other insurance companies offer GAP insurance for your vehicles.

GAP Insurance Pros:

  • Generally low costs
  • It means you can generally walk away from an accident with less of a financial burden
  • If you purchase a more expensive vehicle you are more likely to have financial stability in an accident

GAP Insurance Cons:

  • Eventually, there will be a point when you owe less than the vehicle is worth and you may not need GAP insurance coverage and you may not be able to get a refund for the year
  • If you buy your vehicle at a low price it may not be worth it
  • GAP insurance is an additional cost with requirements for upkeep

Make sure to weigh the pros and cons as they apply to your unique situation.

Is CarMax GAP Insurance a Good Idea?

On average, the usual CarMax vehicle sale is over $21,000. While CarMax is a leader in used car sales, the company does not typically offer vehicles below $10,000. With GAP insurance some vehicle sales below $10,000 may not be worth it.

CarMax is known for providing high-quality used vehicles. When you combine the costs of financing, your monthly payment can be high. CarMax GAP insurance will help you be financially sound, even if you are upside down on your vehicle payments.

The CarMax website does not directly list how much the GAP insurance costs, most customers report the coverage costs of $30 a year, for most vehicles. It is important to check with your local CarMax sales office to verify all GAP insurance costs.

CarMax GAP Insurance Final Review

If you are financing directly through CarMax, you can expect to have the GAP insurance added to your financing package. With CarMax’s higher-quality vehicles and higher prices, your monthly price may be more depending on how much of a down payment you have.

But for only $30 a year, this coverage is an excellent option to ensure financial stability in an accident, theft, or natural disaster. Make sure to ask your CarMax sales rep to provide you with all the details on their GAP insurance plan.

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