Where to buy gap insurance

The minute you drive a vehicle off the dealership lot, it depreciates in value. Unfortunately, what your insurance company will pay out if your vehicle is stolen or totaled in an accident is its actual cash value – not what you may owe on the car. 

Guaranteed auto (or asset) protection, also known as gap insurance, covers the “gap” between what you currently owe on your auto loan and what your insurance pays out if your vehicle is damaged, totaled or stolen – minus your deductible. 

Key Highlights
  • If you have negative equity in your car, you owe more on your car loan than what the car is worth because of depreciation, a longer loan term or a small down payment.
  • Gap insurance pays the difference between the balance on your vehicle loan and the current market value on your vehicle if your car is totaled or stolen and not recovered.
  • Many auto insurance companies, banks, credit unions and dealerships provide gap insurance if purchased with comprehensive and collision coverages.

Many major car insurance companies offer gap insurance – which some insurers call loan/lease coverage. But you don’t have to buy it and, in fact, not all insurance companies offer it. 

When you insure a new car, you can opt for gap coverage as an add-on endorsement to your standard policy. But you also must have collision and comprehensive coverage

In some states, auto dealerships are required to offer gap insurance at the time you purchase your vehicle and can include it as part of your car loan. Another option is to check with your bank or credit union.

How does gap insurance work?

Gap insurance 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 can have more limitations and the terms of loan/lease gap coverage will vary depending on the guidelines established by the issuing company.

David Adler of Adler Insurance Group, a Denver-area insurance agency, says that gap insurance can be a lifesaver 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,” he says.

Below are standard terms for a gap policy:

  • Gap insurance is available through most insurance companies as an endorsement or add-on to your standard auto insurance.
  • Gap insurance provides coverage when a vehicle sustains a total loss.
  • Gap insurance covers the difference between the actual cash value 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 insurance will pay out anywhere from five to 45 days after the claim.

“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,” he says. “So, if you forget to cancel that add-on at that point, you'll essentially pay for insurance that you no longer need.”

Check out our experts’ recommendations on What is gap insurance, what does it cover and is it worth it?

Which insurance providers sell gap insurance?

Below is a list of gap insurance providers based on 2022 research by CarInsurance.com:

  • AAA
  • AIG
  • Allstate
  • American Family
  • Auto-Owners
  • Chubb
  • CSAA Insurance Group
  • Esurance
  • Liberty Mutual
  • Nationwide
  • Progressive
  • Safeco
  • State Farm
  • Travelers
  • USAA

Most large insurance companies sell gap insurance as an endorsement or add-on coverage to your vehicle’s insurance policy. Some offer it as standalone coverage, but not many. 

In some cases, gap insurance may be called something catchier, 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."

Here are a few of the bigger insurance companies offering gap insurance and some pricing information:

American Family

American Family Auto Insurance gets high marks from its customers. It offers a variety of discounts and competitive pricing for gap insurance. To get a quote for gap insurance, you’ll have to contact an agent – pricing isn’t available online and varies from state to state. Generally, expect to pay between $5-$15 per month for gap coverage. 

Esurance

Esurance will pay up to 25% of your car’s actual cash value if it’s stolen or totaled in an accident. That’s at the high end for many insurers offering gap insurance. Get a quote over the phone or online.

Liberty Mutual

You can get gap insurance from Liberty Mutual, with an average cost of $5 to $15 per month. 

Nationwide

Nationwide does not disclose the average cost for gap insurance coverage unless you get a quote and you must buy comprehensive and collision coverage to get gap coverage.

Progressive

Progressive offers the cheapest average rate at an average of $5 per month and pays a maximum of 25% above your car’s value if it’s stolen or a complete loss after an accident. Like most other carriers, you must purchase both comprehensive and collision coverage to buy gap insurance from Progressive. 

Travelers

You can add loan/lease gap insurance coverage to your policy for about 5% of your vehicle’s comprehensive and collision premium, but your vehicle is only eligible if purchased directly from a new car dealer. 

Frequently asked questions: Companies that offer gap insurance

Does Geico offer gap insurance?

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. Another option is to buy gap insurance from the dealership where you purchased your car, but it will likely cost more than if purchased from an insurance provider.

Can you buy standalone gap insurance?

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

Two providers that offer standalone gap coverage include:

EasyCare Insurance

EasyCare offers standalone gap insurance, which must be acquired when purchasing your vehicle. It covers up to $50,000 of the gap between your loan or lease balance and your insurance settlement, covers up to 150% of your car’s value and protects your vehicle for the term of your loan up to seven years. EasyCare does charge a one-time fee (not disclosed) that is included in your vehicle's financing.

AutoPay Insurance

AutoPay standalone gap waivers cover vehicles valued up to $100,000. The company offers terms up to 84 months and for losses up to $50,000. AutoPay gap also covers the value of your vehicle up to 150% MSRP and your insurance deductible up to $1,000. 

How much is gap insurance?

The Insurance Information Institute says gap insurance adds about $20 a year to your annual premium. The more expensive your vehicle, the more you’ll pay in gap insurance. And how much you actually pay for gap insurance depends on where you buy it – it is cheaper to buy coverage from an insurance carrier than from a bank or dealership.

“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, principal at Western Michigan Insurance Agency.

“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.”

If you buy gap insurance from a dealership you may have a hefty mark-up price, according to consumer advocacy groups. Some dealerships mark up the cost of gap insurance by about 150%. 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.

Check out our detailed guide on Gap Insurance Cost - What you can expect to pay?

Can I buy gap insurance online?

Yes. If a company offers standard car insurance online, you’ll likely be able to find gap insurance as well.

When should you buy gap insurance?

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.

Can you buy gap insurance at any time?

You usually can buy gap coverage for a car as long as you still have a lien on the vehicle.

What is a gap waiver?

A gap waiver removes your obligation to pay the difference between your car’s actual cash value, or ACV, and the remaining balance on your loan in case of a total loss. Waivers are agreements made between borrowers and lenders and often are built into a loan contract or lease agreement. 

What’s the difference between gap insurance and agreed value insurance?

Agreed value insurance is a type of coverage offered by some carriers that is similar to gap insurance. Under these plans, you and the insurance company determine the value of your vehicle. If you file a claim, you are entitled to either the agreed-upon value of the vehicle or the full amount required to fix the car, regardless of market depreciation.

Agreed value policies are usually for classic, antique or special vehicles, or a vehicle that is expected to appreciate rather than depreciate over time. It may not be available for your vehicle. Insurers such as Chubb and AIG offer agreed-value insurance plans.

How is gap insurance regulated?

There are several state and federal regulations concerning gap insurance. 

  • Truth in Lending Act: Because gap insurance is voluntary in most states, this act specifies when finance charges can be excluded.
  • State standards: Dealers can only sell gap insurance to their customers through an insurance agent. A policy must also meet each state’s requirements.

Learn more about what are the Car insurance rates by state with an interactive map

Sources:

  1. Insurance Information Institute. “Gap insurance.” Accessed May 2022.
  2. National Consumer Law Center. “Auto Add-Ons Add Up: How Dealer Discretion Drives Excessive, Inconsistent, and Discriminatory Pricing.” Accessed May 2022.
  3. Office of the Comptroller of the Currency. “Truth in Lending.” Accessed May 2022.
  4. Autopay. "AutoPay standalone gap waivers." Accessed May 2022.
  5. EasyCare. "Guaranteed Asset Protection." Accessed May 2022.