Where to buy gap insurance

Guaranteed Auto (or Asset) Protection or Gap insurance protects you from becoming upside down on your car payments or having negative equity in your vehicle. But it only kicks in if your car is totaled in an accident or stolen and not recovered.

Not all insurance companies offer Gap insurance, but most do. Even then, they will only reimburse you for the current market value of your vehicle. Learn what it is, who offers Gap insurance protection and how it works.

Key Highlights
  • Gap insurance pays the difference between the balance on your vehicle loan and the fair market value on your vehicle if your car is totaled or stolen and not recovered.
  • You may have “negative equity” in your car, meaning you owe more on your car loan than what the car is worth due to depreciation, a longer loan term, or a small down payment.
  • Many auto insurance companies, banks, credit unions, and dealerships provide gap insurance, but usually only if purchased with comprehensive and collision coverages.

Which companies sell Gap insurance?

Gap insurance providers include many major car insurance companies. In some cases, when you are insuring a new car, you can get Gap coverage as an add-on endorsement to your standard policy. However, you must also have collision and comprehensive coverage on the policy. Check with your insurer to find out if it is offered.

You can also often purchase Gap insurance from the dealership, or your lender and have it included as part of your car loan. Another option is to check with your bank or credit union.

How much Gap insurance costs will depend on where you buy it – it is cheaper to buy from a standard insurance carrier than from a bank or dealership. Progressive says it costs about $5 a month, or $60 a year, on average. Esurance and the Insurance Information Institute said it is about $20 a year.

Buying Gap insurance from a dealership means you’ll pay a hefty mark-up price, according to consumer advocacy groups. Dealerships’ average mark-up cost on Gap insurance is about 150%.

In some cases, it’s much higher. Thirty-eight dealers in one analysis were found to hike the price of Gap insurance by an average of 300%, according to a National Consumer Law Center report.

Another option is to buy a standalone policy, although few insurance companies offer Gap insurance as part of a standalone policy. You can sometimes get a standalone policy, however, from your lender or dealership.

What is gap insurance, what does it cover and is it worth it?

Gap insurance providers

You can buy Gap insurance from most major car insurance companies, although there are some exceptions.

Below is a list of Gap insurance providers and details of their offerings, based on a 2020 research report by CarInsurance.com.

  • AIG
  • AAA
  • Allstate
  • American Family
  • Chubb
  • CSAA Insurance Group
  • Esurance
  • MetLife
  • Nationwide
  • Progressive
  • Safeco
  • State Farm
  • Travelers
  • USAA
Tip iconInformation

Note, however, that while Gap insurance is offered by each of these companies, it is sometimes called “loan/lease coverage.” Both coverages do the same thing – cover the "gap” or difference, if any, between your car's actual cash value (ACV) and what you still owe on your vehicle if it’s stolen or totaled. But loan/lease coverage often has more limitations.

In other cases, Gap insurance may be called something more catchy, yet it works in the same or similar way.

For Example:

USAA Gap insurance is called "Total Loss Protection" insurance whereas State Farm Gap insurance is called "Payoff Protector"

Standalone Gap insurance providers

You buy standalone Gap insurance independently from your standard car insurance policy. Standalone Gap coverage is different than standard Gap insurance where you must have comprehensive and collision coverage before your existing provider will sell you Gap coverage.

Not many insurers offer standalone Gap insurance. If they do, it likely comes with caveats. GapDirect, a subsidiary of Western General, once offered standalone Gap insurance, but no longer accepts new customers. Dealerships and lenders often sell standalone Gap insurance, but it can be costly.

Can I buy Gap insurance online?

Yes, typically, you can buy Gap insurance online anywhere that you buy standard car insurance. You can also buy it online from standalone Gap providers.

Policies are limited to the terms of your policy and you must purchase a policy with comprehensive and collision coverage included. Depending on the insurer, sometimes Gap coverage will cover your claim deductible.

Typically, however, Gap insurance only pays the difference between what is owed and the car’s actual cash value.

State Farm Gap insurance: how Payoff Protector works

Does State Farm offer Gap insurance? Yes, but with restrictions and by a different name. State Farm Gap insurance is called “Payoff Protector” and technically isn’t insurance coverage. Payoff Protector is available only to those who got their car loan from a State Farm bank, and coverage is included automatically when you close on your car loan.

If your vehicle is determined to be a total loss before you pay off your loan, the State Farm bank will cancel the difference between the insurance payout and the unpaid principal balance due on the loan.

Agreed Value coverage Gap insurance companies

“Agreed Value” insurance is a type of coverage offered by some carriers that is similar to Gap insurance – again, it accomplishes the same goal but arrives a different way.

Chubb and AIG offer Agreed Value plans. Under these plans, you and the insurance company determine the value of your vehicle when you buy your policy. If your car is totaled or stolen before it's paid off, you'll receive that agreed-upon amount, regardless of market depreciation.

In general, Agreed Value policies are for classic, antique or special vehicles, so it may not be available for your vehicle. Check with the insurer to make sure your car is eligible.

Is there Geico Gap insurance?

No, Geico does not offer Gap insurance. If you have a Geico car insurance policy and want Gap insurance, you can purchase standalone Gap insurance from another insurer that sells it.

If your existing insurer also doesn’t offer Gap insurance, you can look for standalone Gap insurance providers. Or, another option is to buy Gap insurance from the dealership where you purchased your car, but it will likely cost much more than coverage purchased by an insurance carrier.

Can you buy Gap insurance at any time?

David Adler of Adler Insurance Group, a Denver-based insurance agency advises, “Gap insurance can be a life-saver for many drivers who have not yet paid off their car or are currently leasing one.

This insurance add-on helps reimburse a car owner when the payment for their total loss is less than the outstanding loan/lease balance. Gap insurance will cover the difference between your insurance payout and the remaining balance on your vehicle.”

Some insurance carriers let you buy stand-alone Gap coverage at any time before a loss occurs. GapDirect does. But for others, there is usually only a short-time period to buy Gap insurance. Some car insurance companies require the vehicle to be brand new for you to be eligible for Gap lease/loan coverage.

The definition of brand new varies, but typically means you are the car’s original owner, and the vehicle is not older than two or three model years. Some insurers require you purchase a Gap policy within 12 months of the purchase of the vehicle.

If you believe you’ll be underwater and owe more on your car loan than the car is worth at the time you purchase your vehicle, check for Gap insurance in the early months so you don’t miss out.

Expert Advice
Agency President at Adler Insurance Group
David Adler
Agency President at Adler Insurance Group

Adler advises, “At a certain point, the difference between what you owe and your car's value will drop to a point where it no longer makes financial sense to have a gap policy. So if you forget to cancel that add-on at that point, you'll essentially pay for insurance that you no longer need.”

What are the best Gap insurance companies?

Most large insurance companies sell Gap insurance as an endorsement or add-on coverage to your vehicle’s insurance policy. Some offer it as a stand-alone, but not many. Based on price, ease of application, fees and other criteria, we picked the very best Gap insurance companies to help you find one that works for you.

Travelers

Travelers premiums are affordable when compared to other insurance carriers. You can add loan/lease Gap insurance coverage to your policy for about 5% of your vehicle’s comprehensive and collision premium. Travelers also has few customer complaints and ranks high for overall value.

Progressive

Progressive beats out the other major insurance providers with the cheapest average rate for drivers ($1,031) with an accident claim on their record. It also pays up to 25% above your car’s value if it’s stolen or a complete loss due to an accident. Like most other carriers, you must purchase both collision comprehensive and collision coverage to buy Gap insurance from Progressive. it also gets high marks for customer service and website or app “ease of use.”

Esurance

With a Gap insurance policy, Esurance will pay up to 25% of your car’s value if it’s stolen or totaled in an accident. That’s at the high end for many insurers offering Gap insurance. Esurance also offers discounts, depending on where you live, and as a company, has better than average customer service.

Nationwide

Nationwide Gap insurance costs depend on your car’s value. It does not actually disclose average prices, however, for this coverage. Nationwide also offers discounts and a variety of other policies for drivers, including pay-per-mile and usage-based options. You must purchase comprehensive and collision coverage to get it. The company gets good customer satisfaction reviews, but insurance costs do tend to run a bit more than some other companies.

Is Gap insurance regulated by the state?

No. Gap insurance is not regulated by the state. However, some states do regulate Gap waivers, which are between the lienholder or lender and the consumer. Gap waivers have nothing to do with insurance and cannot be purchased as an add-on or endorsement to a standard car insurance policy.

Overview of how Gap insurance works

Below are standard terms for a Gap policy, but remember, the terms of loan/lease Gap coverage will vary depending on the guidelines set up by the issuing company:

  • Gap insurance is available through most insurance companies as an endorsement or add-on to your standard auto insurance.
  • Provides coverage when a vehicle sustains a total loss.
  • Covers the difference between the actual cash value (ACV) of the vehicle at the time of loss (less deductible) and the amount owed on the loan or lease.
  • Collision and comprehensive coverages are usually required.
  • Payment will not include unpaid finance fees, excess mileage, or other charges or expenses associated with the loan or lease.
  • Typically, Gap will pay out anywhere from five to 45 days after the claim.
Principal at Western Michigan Insurance Agency
Benjamin Bruinekool
Principal at Western Michigan Insurance Agency, LLC

“It is worth keeping in mind that Gap insurance is an added expense that is not advertised in the sticker price, on the original auto insurance quote, or on the initial loan quote from a bank/lender,” says Benjamin Bruinekool.

“It's something that is deemed an "upsell" when sitting with the finance manager at a dealership or when signing papers with the bank and can often catch buyers off guard if they are not familiar.”