Key Takeaways
Auto insurance is a necessity if you want to drive worry-free. You may also need gap insurance in addition to your standard liability and collision coverage. "Guaranteed auto protection" is referred to as "Gap" in the insurance industry.
If your car is totaled or stolen and you owe more than the car's depreciated worth, Gap insurance, an optional form of auto insurance, can help you. Another name for gap insurance is "loan/lease gap coverage".
Certain car, truck, and SUV models may require GAP insurance if you plan to finance your purchase. For example, luxury sedans, SUVs, and certain sports utility vehicles may depreciate and lose value more quickly than usual.
The type of car you buy or lease can impact whether you need GAP insurance. But, is GAP insurance a good investment? Consider whether or not it’s a good idea to buy collision insurance instead of comprehensive insurance if you have a lot of debt on your car.
To figure out how much GAP insurance you need, you have to subtract your car's present value from the amount you still owe on your loan. You should be able to find out how much you still owe from your lender.
GAP Coverage = Your Car loan balance - Real cash value of your car
It’s important to know that the amount of GAP insurance coverage goes down over time. If your lender lets you, it might be worth the chance to stop paying for coverage.
For as little as $20 a year, you may add GAP insurance to your usual comprehensive auto insurance coverage. It is usually priced between 5% to 6% of the collision and comprehensive premiums on your auto insurance policy by a major insurer.
Every insurance company sets GAP insurance prices based on your car type. In general, getting insurance for a high-end car like a Tesla or Mercedes costs more than for a cheap car like a Honda Civic.
| Model | MSRP | Avg cost of gap coverage |
|---|---|---|
| Honda Civic | $22,350 | $122 |
| Ford F-150 | $30,495 | $124 |
| Hyundai Santa Fe | $27,700 | $135 |
| Mercedes GLC300 | $43,850 | $157 |
| Tesla Model 3 | $46,990 | $183 |
Most big car insurance companies give GAP insurance in some way, but many have limits on which cars they will cover. GAP insurance from an insurance company is usually inexpensive, so we suggest people who could benefit from it buy it. Some car shops offer GAP insurance coverage you can buy on its own if that’s what you want.
| Insurer | Does it offer GAP insurance? | Limitations |
|---|---|---|
| State Farm | Yes | Only vehicles financed through State Farm Bank |
| Progressive | Yes | Up to 25% of actual cash value (lease/loan coverage) |
| Allstate | Yes | New vehicles only |
| Esurance | Yes | Up to 25% of actual cash value (lease/loan coverage) |
| Farmers | Yes | New vehicles only |
| Travelers | Yes | New vehicles only |
| Nationwide | Yes | - |
| 21st Century | Yes | Only available in AZ, CO, ID, IA, KY, MT, NM, OR, NE, TN, UT, WA, and WI |
| USAA | Yes | Only vehicles financed with a USAA auto loan |
| Insurance Company | Monthly Quote for GAP Insurance |
|---|---|
| Amigo USA | $164 |
| Kemper | $166 |
| Travelers | $198 |
| Nationwide | $217 |
| Elephant | $224 |
| Clearcover | $225 |
| Safeco | $236 |
| Dairyland | $322 |
| Bristol West | $327 |
| AssuranceAmerica | $329 |
| The General | $384 |
| Infinity | $461 |
Like other types of insurance, the choices and requirements for gap insurance vary from state to state. Learn about the coverages in your state so you can make sure you're always covered. Compare quotes today to find the best gap insurance in your state.
If you sell your car before your GAP insurance policy expires, you may be eligible for a refund on your premiums. The refund amount will depend on the amount of time that has passed since you purchased the policy and the amount of depreciation your car has experienced.
GAP insurance doesn’t pay for regular upkeep, damage that isn’t a total loss, or car payments that must be made on time. GAP insurance provides the difference between how much a car is worth in cash and how much is still owed on a loan or lease if the car is stolen or written off. This insurance is not needed by law, but some lenders and lessors need it for a car that is being financed.
GAP insurance may not pay for your comprehensive or accident coverage deductibles, but each insurance company has its own rules.
Some car insurance companies offer other types of security that sound like GAP insurance. Here are two things you could do instead of GAP insurance.
Coverage for replacing a new car - New car replacement coverage will pay you enough to buy a new car if your car is stolen or wrecked.
That’s not the same as the real cash value, which takes into account depreciation. Your car must be a certain age and have a certain number of miles on it to get new car replacement coverage.
Most of the time, new car substitute coverage comes with a deductible.
Here are some companies that provide this type of insurance:
Better coverage for replacing your car - Horace Mann and Liberty Mutual are car insurance companies offering “better car replacement” coverage. This pays you for a newer or better car than the one you lost. This plan may also have limits on how far you can drive.
Only policyholders who own their cars can buy the extra security. It can’t be done on rented cars.
GAP insurance is a type of auto insurance which helps in paying the difference between the amount you owe on your car loan or lease and the amount your car is worth if it is totaled or stolen. This can happen if you have a large down payment or finance your car for a long time.
GAP and full coverage car insurance are two types of auto insurance. GAP insurance is designed to pay the difference between the amount you owe on your car loan or lease and what your car is worth if it is totaled or stolen. On the other hand, full car insurance provides comprehensive coverage for your vehicle, including collision, comprehensive, and liability insurance.
No, GAP insurance does not cover engine failure. GAP insurance is designed to pay the difference between the amount you owe on your car loan or lease and what your car is worth if it is totaled or stolen. It does not cover repairs to your car, including engine failure.
If your car’s engine fails, you will be responsible for the cost of repairs. You may need to sell your car for salvage value if you cannot afford the repairs.
Getting GAP insurance depends on your situation. You may not require GAP insurance if you have a high down payment or short loan term. Small down payments and long loan terms accelerate car depreciation. GAP insurance may not be necessary for a new, expensive car. Older or high-mileage cars depreciate faster. If you have enough savings or another car to drive, you may not require GAP insurance if yours is totaled. GAP insurance can protect you from vehicle loan insolvency. GAP insurance protects you if your automobile is stolen or wrecked.
GAP insurance is an optional type of car insurance that helps pay the difference between the amount you owe on your car loan or lease and the amount your car is worth if it is totaled or stolen. This can happen if you have a large down payment or finance your car for a long time.
GAP insurance generally costs between $20 and $50 per month. However, it can be more expensive for cars that are more expensive or for people with lower credit scores.
Yes. Full coverage car insurance typically includes collision and comprehensive coverage, which will pay for repairs or replacement if your car is damaged or stolen. However, full coverage car insurance only sometimes includes GAP insurance. GAP insurance is a separate type that specifically covers the difference between the amount you owe on your car loan and the amount your car is worth if it is totaled or stolen.
The length of GAP insurance depends on the type of GAP insurance you purchase. GAP insurance purchased from a car dealer or lender typically lasts the entire length of your car loan. GAP insurance from an insurance company can be purchased for a shorter period, such as one or two years.
There are a few ways to get GAP insurance:
Yes, GAP insurance covers theft. GAP insurance pays the difference between the amount you owe on your car loan and what your car is worth if it is totaled or stolen. This can happen if you have a large down payment or finance your car for a long time.
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