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Updated July 5, 2022
You finally bought that brand-new car! Congratulations. To protect the precious vehicle that you just bought with a big car loan, you did the right thing and bought a full-coverage auto insurance policy in case your car is totaled or stolen. But while that will insure the value of your vehicle, it might not be enough to cover the full loan amount. That’s when you need gap coverage.
When you take out an auto loan, you’re putting a lot of money on the line. To find the auto insurance company that’s willing to invest like you are, you need a trusted guide. That’s Insurify. In just a few minutes, you’ll get free access to special quotes and deals so you can compare insurance quotes side by side until you find the right one.
Gap (guaranteed asset protection) insurance is required for most leased vehicles.
The cheapest provider we found for gap insurance is USH&C, with average monthly rates of $149.
Drivers can buy gap insurance as an add on to their existing policy or as a stand-alone policy.
Cheapest Companies for Gap Insurance Coverage
What companies offer gap insurance?
Many insurance providers offer guaranteed asset protection, or gap, insurance. Gap insurance provides protection when a drivers’ car is stolen or totaled, and many lenders will require this type of coverage. Drivers who lease their cars should probably consider adding gap insurance to their coverage.
Gap coverage sure doesn’t have to break the bank. Here’s a list of gap insurance companies that offer coverage at reasonable rates to get you started.
|Insurance Company||Monthly Quote for Gap Insurance|
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What is gap insurance?
Now that you’ve left the car dealership, you know that depreciation will reduce your car’s actual cash value by about 20 percent in its first year alone, according to the Insurance Information Institute. Ouch!
That’s enough to put you underwater, meaning that for a little while, you probably owe your lender more than your car is worth. Thus, if your new vehicle is totaled or stolen, your full-coverage car insurance policy still won’t pay off the car loan.
This is what gap insurance covers. Standing for “guaranteed asset protection,” gap coverage pays out the difference between the value of your car and the remaining loan payments you still owe your lender. (That gap is also called “negative equity.”)
Keep in mind, your car has to be a total loss for your gap insurance to kick in. Otherwise, your collision coverage and/or comprehensive coverage will cover the damage—after you pay the deductible on your full-coverage auto insurance policy, of course.
If you bought a new car, you are probably required by your lender or leasing agent to have gap insurance. Otherwise, it’s optional coverage. If you don’t have a loan or lease on your car, you have no use for gap coverage.
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How Gap Insurance Works
Here’s how to know if you need gap insurance. Take a look at the Kelley Blue Book to ascertain the current value of your car. Compare that with the amount you still owe on the car loan. If the value of the car is less than your remaining loan payments, you need gap insurance.
Why? Imagine this: You’re driving your new car without gap insurance. You still owe $25,000 on it, and unfortunately, you get in a wreck, and your car is totaled.
The collision insurance on your car insurance policy reimburses you for the car’s actual cash value (ACV), which is only $19,000, minus your $1,000 collision deductible. With a payout of only $18,000, you still have to make $7,000 in loan payments on a car that doesn’t even exist anymore! What a nightmare. You can see why gap insurance is important.
There are plenty of insurance companies that sell gap insurance as an add-on to their normal car insurance policies. Some insurance companies sell special gap coverage as a stand-alone policy. You’ll have to compare prices and exclusions on the various policies to see which is right for you.
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Tips for Cheaper Gap Insurance
Is gap insurance worth it? Well, as long as you’re not paying too much, and you’re not holding on to it longer than you need to. Follow these tips to lower your gap insurance cost:
Drop It ASAP
Your new car isn’t going to be underwater forever. During your first year of loan payments, you’ll probably be holding some negative equity and need gap coverage. Unless you have a really long loan term, the amount you owe will soon be lower than the value of your car. So keep a close eye on Kelley Blue Book to drop gap insurance the first month it’s not necessary.
Mind the Gap
Just like when you’re shopping for collision coverage and comprehensive insurance, you don’t want your premiums to outweigh your potential payouts. Take a close look at the gap you’re working with: the gulf between your car’s value and the amount you still owe your lender. If the gap coverage premiums are greater than the gap in the first place, forget the gap insurance.
Avoid Dealership Gap Insurance
The dealership that sold or leased you your new car might have gap insurance to offer you, or it was included in your loan or lease agreement. That might be convenient, but you’ll almost always get better pricing with car insurance companies.
Shop Around for Car Insurance
Your current insurance provider might have a good gap insurance policy to add to your existing auto insurance policy. But what if you can do better elsewhere? New cars are expensive to insure. Make sure you compare car insurance quotes with Insurify’s well-reviewed tool that has saved millions of people money on their auto insurance premiums.
Gap Insurance By State
Like other kinds of insurance, gap insurance coverage options and requirements vary by state. Read up on your state’s coverages so you can make sure you’re always protected. Compare quotes today and find the best gap insurance in your state.
The Best and Cheapest Gap Insurance Coverage
Even though your car dealership will likely try to sell you a gap insurance policy, you’ll probably do better with an insurance provider. So do the smart thing with your money and go shopping. Using Insurify, you can quickly and easily find quotes from all the important insurance companies to get the gap coverage you need at the best price. Plus, it’s free.
Frequently Asked Questions
Gap insurance—which is also spelled GAP insurance because it stands for “guaranteed asset protection”—covers the negative equity you carry on a car loan. That’s the difference between your remaining loan payments and your car’s actual cash value, which could be lowered by depreciation.
If you have a loan or lease on your car, you might need gap insurance, at least for the first year you’re driving your new car. But as soon as your car’s Kelley Blue Book value is lower than the amount you owe in loan payments, you won’t need gap coverage anymore.
Combining gap insurance with your normal car insurance coverage and then combining your car insurance policy with a policy like homeowners policy and other insurance is the best way to save money on your insurance bills. Insurify will search far and wide for the insurance providers that suit your needs best. It’s time to try it out!
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Data scientists at Insurify analyzed over 40 million auto insurance rates across the United States to compile the car insurance quotes, statistics, and data visualizations displayed on this page. The car insurance data includes coverage analysis and details on drivers' vehicles, driving records, and demographic information. With these insights, Insurify is able to offer drivers insight into how their car insurance premiums are priced by companies.