Car loan GAP insurance question.

I am thinking about buying a one time payment GAP policy through my credit union.

I was under the impression that once your loan amount becomes LESS than the cash value of the car, GAP becomes moot and any premium you paid in is lost.

I read another post saying once you buy a GAP policy, it pays cash value + 20% (or some percentage) if the car is totalled, regardless of how much you owe on the loan.

Is this how it works, or was my original thinking correct?