Melanie is a blogger, author, and speaker specializing in personal finance and debt management. She’s also the author of the blog and book “Dear Debt.”
3+ years experience in insurance and personal finance editing
Katie uses her knowledge and expertise as a licensed property and casualty agent in Massachusetts to help readers understand the complexities of insurance shopping.
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In the event of total vehicle loss, severe damage, or theft, gap insurance covers the difference between the value of your car and the remaining amount you owe on your car loan.[1] It’s smart to invest in gap insurance if you have a car loan or lease your vehicle.[2]
Auto lenders don’t typically require drivers to purchase gap insurance.
Gap insurance pays out after collision and comprehensive coverage.
Most cars depreciate in value by 20% within a year, which means you can owe more on your car loan than the value of your car.
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What’s gap insurance, and how does it work?
Also sometimes referred to as guaranteed asset protection, guaranteed auto protection, or loan/lease coverage, gap insurance is optional coverage. It pays the difference between the actual cash value (ACV) of your vehicle and your car loan balance if someone steals your car or you total your vehicle.
For example, if a car accident totals your vehicle, your insurer may cover the current worth of your vehicle (minus your deductible) with collision insurance.[3] However, the ACV of your vehicle may cost less than what you still owe on your auto loan.
Your new car will likely depreciate in value by 20% during the first year you own it, according to the Insurance Information Institute. Since vehicles depreciate rather quickly, gap insurance can provide financial protection if you’ve financed or leased your vehicle. Buying gap insurance helps you avoid making out-of-pocket payments for a total loss or stolen vehicle.
What does gap insurance cover in Michigan?
Gap insurance can cover the cost difference between the ACV of your vehicle and the remaining auto loan or lease balance. It’s a supplemental coverage that works alongside collision and comprehensive coverage in the event of auto theft or a vehicle-totaling accident. It doesn’t cover partial vehicle damage, routine maintenance, or missed car payments.
Here’s an example to demonstrate how the coverage works. In this scenario, you have $30,000 left on your auto loan, the ACV of your car is $25,000, and your comprehensive coverage deductible is $500.
If someone steals your car, your comprehensive policy payout is $24,500, which is the ACV of your vehicle minus your deductible. You still owe $5,500 on your auto loan. If you have a gap insurance policy, it can cover this remaining balance so you don’t have to deal with a financial loss.
You should know that gap insurance coverage may have maximum claim benefits and loan term limits. Read the terms and conditions of your policy to understand the reach of your coverage.
Keep in Mind
When you lease or finance a vehicle, the insurance payout from a total loss will go to pay the leasing company or lender — not in your pocket.
Gap insurance vs. full coverage
A full-coverage policy in Michigan generally includes a combination of coverages to keep you protected, including liability, collision, and comprehensive insurance. Michigan requires drivers to carry a minimum amount of bodily injury and property damage liability insurance to cover the costs of the other driver’s medical bills and vehicle damage in the event of an accident.
Collision coverage kicks in to cover your vehicle damages after an accident, and comprehensive insurance pays for repairs caused by vandalism, severe weather, and other qualifying events. Though full-coverage insurance provides a range of protections for Michigan drivers, it doesn’t include gap insurance. However, the two optional coverages do work well together.
Not everyone with full-coverage insurance needs gap insurance, but it’s a good idea for drivers financing or leasing a vehicle worth less than their auto loan balance.
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Who needs gap insurance in Michigan?
Michigan law doesn’t require gap insurance, but your lender might. Even if it doesn’t, it’s typically a smart move to consider gap insurance if you’ve financed or leased your vehicle.
You should consider gap insurance if any of the following statements apply to you:
Your auto loan lender requires it.
You have a repayment term of 60 months or more.
You put no or a low down payment (such as 20% or less) on your vehicle.
You’re currently leasing a vehicle.
You have a high interest rate on your auto loan.
You have a luxury or electric vehicle that may depreciate faster than standard vehicles.
You have negative equity from your previous auto loan rolled into your new one.
“It’s not uncommon for the value of a vehicle to depreciate quickly, especially with new vehicles,” says Zack Fortman, personal lines insurance agent and office manager at Fortman Insurance Services. “When this happens, there could be a gap between the vehicle value and loan amount.”
If the current balance on your auto loan exceeds the actual cash value of your vehicle, you should purchase gap insurance. You may not need gap insurance, however, if the difference between your auto loan balance and the actual cash value is small or if you can comfortably afford any gaps between the insurance payout and your auto loan.
If you’re buying a new vehicle, the dealership might offer you gap insurance during the purchase. Though this is convenient, you typically can find more cost-effective options. In Michigan, you can purchase gap insurance from an insurance company or your lender. Not all auto insurers offer it, so you should check with your current insurer.
If you get gap insurance through a car insurance company, you can typically add it to your current policy. For example, if you have collision and comprehensive coverage, you can add gap insurance with the same insurance company. Some auto insurers may offer stand-alone gap insurance policies, though this is less common.
Another potential way to get gap insurance in Michigan is through your auto loan lender, which is typically a bank, credit union, or other financial lender. For example, Michigan First Credit Union offers auto loans and gap insurance coverage. To qualify for credit union products, you typically need to become a member and meet certain eligibility requirements.
Best gap insurance companies in Michigan
Many car insurance companies offer gap insurance, but some don’t. For example, State Farm and GEICO — two of the nation’s largest auto insurers — don’t offer gap insurance. Make sure you check with your current insurer to see whether it provides it.
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-five scale. The Insurify editorial team researches insurer data to determine the final scores.
4.1
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
834
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$67/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$106/mo
Auto-Owners provides loan or lease gap coverage in Michigan. The company earned an Insurify Quality (IQ) Score of 4.0 out of 5 and offers affordable average liability and full-coverage rates in Michigan. Additionally, Auto-Owners policyholders can save money through numerous available discounts.
Pros
High customer satisfaction
Multiple discounts
Cons
I was pleased with the agent and for years the price, but now they have gotten too expensive for a person on a fixed income.
Mary - August 13, 2023
Verified
I was dropped because of two minor at-fault accidents in two plus years.
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-five scale. The Insurify editorial team researches insurer data to determine the final scores.
4.3
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
818
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$161/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$255/mo
Travelers offers gap insurance in Michigan and provides a good option for drivers with incidents on their driving record. The company has an IQ Score of 4.2 and offers a number of unique discounts for policyholders to benefit from, including discounts for homeowners, students, and owners of electric or hybrid vehicles.
Pros
Accident forgiveness available
Robust coverage selections and discount offerings
Cons
Rideshare coverage only available in Colorado and Illinois
High number of negative customer reviews with the Better Business Bureau
They have the lowest rates I could find.
Elise - September 11, 2023
Verified
They are one of the few companies writing policies for a full year. All these "discount companies " miss lead you by quoting 6 month policies.
The Insurify Quality (IQ) Score uses more than 15 criteria to objectively rate insurance companies on a one-to-five scale. The Insurify editorial team researches insurer data to determine the final scores.
3.8
JD Power
J.D. Power data measures overall customer satisfaction and claims satisfaction based on a 1,000-point scale.
807
Liability Only
Liability-only insurance, sometimes called minimum-coverage insurance, pays for bodily injury and property damage to others in an accident the policyholder causes. It does not pay for the insured’s own damages.
$170/mo
Full Coverage
Full-coverage car insurance generally includes liability, collision, and comprehensive coverage, and may include other optional coverages such as uninsured motorist coverage. Collision covers a policyholder’s repair or replacement costs in case of an accident. Comprehensive covers damages caused by non-accident events. The average quote displayed here reflects policies with the following coverage limits: $50,000 bodily injury liability per person; $100,000 bodily injury liability per accident; $50,00 property damage liability per accident; $1,000 collision deductible; and a $1,000 comprehensive deductible.
$269/mo
Liberty Mutual provides gap insurance in Michigan, as well as a range of other coverage options, including original parts replacement coverage, lifetime repair guarantee, roadside assistance, and more. The company earned an IQ Score of 3.7 and offers discounts for teachers and families.
Pros
Wide range of available discounts
Accident forgiveness available
Cons
Many negative reviews and customer complaints
Premiums are relatively high compared to industry average
I don’t like talking to a computer. I’m a one-on-one kind of person.
Data scientists at Insurify analyzed more than 40 million real-time auto insurance rates from our partner providers 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. Quotes for Allstate, Farmers, GEICO, State Farm, and USAA are estimates based on Quadrant Information Services’ database of auto insurance rates.
With these insights, Insurify is able to offer drivers insight into how companies price their car insurance premiums. The data included on this page represent averages across driver ages, genders, credit scores, and driver profiles for Michigan drivers.
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Gap insurance in Michigan FAQs
The following information should help answer any of your remaining questions about finding gap insurance in Michigan.
Does Michigan require gap insurance?
No. Michigan doesn’t require drivers to obtain gap insurance. The state only requires drivers to purchase liability and personal injury protection (PIP) coverage.[4]
Why is gap insurance a good idea?
Gap insurance is a good idea for Michigan drivers financing or leasing a new vehicle. If you experience total vehicle loss, gap insurance covers the gap between your comprehensive or collision insurance payout and the remaining amount you owe on your auto loan.
How can you purchase gap insurance in Michigan?
You can purchase gap insurance in Michigan from an insurance company or credit union that offers this type of coverage. If you’re buying a new car, your dealership may also offer you this type of coverage. You can compare the best rates and find gap insurance that meets your needs.
What are some companies that offer gap insurance in Michigan?
If you’re looking for gap insurance in Michigan, you can check out insurance companies like Auto-Owners, Travelers, and Liberty Mutual. Compare prices and review multiple options.
Melanie Lockert is the founder of the blog and author of the book, "Dear Debt." Through her blog, she chronicled her journey out of $81,000 in student loan debt. Her work has appeared on Allure, Business Insider, Credit Karma, Fortune, and more. She is also the co-founder of the Lola Retreat and host of the Mental Health and Wealth show podcast. She lives in Los Angeles and enjoys jazz music, traveling, coffee, and spending time with her two cats and partner.
Edited byKatie PowersAuto and Life Insurance Editor
Katie PowersAuto and Life Insurance Editor
Licensed auto and home insurance agent
3+ years experience in insurance and personal finance editing
Katie uses her knowledge and expertise as a licensed property and casualty agent in Massachusetts to help readers understand the complexities of insurance shopping.