No, Gap insurance will not cover the engine, transmission or other mechanical issues with your vehicle if they are not working and the car is not declared a total loss.

GAP is there to pay the balance of your loan after insurance has paid for a covered loss in which the vehicle has been declared a total loss and the actual cash value (ACV) of the vehicle has been paid out.

If the engine needs to be fixed do to a covered loss, an accident that caused engine problems, then this may be enough to total out your vehicle. If your car was totaled out due to engine problems then your insurer would need to pay ACV in order for GAP insurance to kick in.

So if your engine needs to be repaired and it is not due to a covered loss that your primary insurance company will pay out a claim on then your GAP insurance would also not pay out a claim for the car. Without a warranty or mechanical breakdown insurance on the vehicle to help with the costs of your engine repairs you will need to decide if you think it is worth to repair or replace the engine or not since you will end up paying for this personally out of your own pocket.