Gap Insurance in North Carolina: Best and Cheapest Companies

Gap insurance covers the difference between a vehicle’s actual value and the amount you currently owe on your auto loan in the event of a total loss or severe damage to your vehicle.^[1]

Generally, you may need gap insurance if you made a small down payment when you purchased the vehicle, have longer loan terms, have a car that depreciates quickly, or carry negative equity from your old auto loan to the new one. Gap insurance is often a requirement when leasing a car.^[1]

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What is gap insurance?

Gap insurance is a type of car insurance coverage available through select insurance companies and car dealerships. It covers the difference, or gap, between a vehicle’s actual value and the amount you still owe on the auto loan if the vehicle is totaled or stolen.

“Gap insurance is a smart choice to preserve your financial health,” says Jasmine Walker, owner of Brightway Insurance Agency in Charlotte, North Carolina. “It helps prevent you from making loan payments on a car you no longer possess.”

How gap insurance works and what it covers in North Carolina

Vehicles start to depreciate the minute they leave the dealership after purchase, and some vehicles depreciate more quickly than others.

Insurance companies use your vehicle’s current value when determining insurance claim payouts. If your insurance payout is less than the remaining loan balance, you’ll be financially responsible for paying the difference to your lender. 

Gap insurance provides financial protection when you owe more than the vehicle is worth, and it typically covers 25% of the value of your car. For example, if your car is worth $10,000, you’d get $2,500 in gap coverage to cover the remaining loan.

Suppose you’re in an accident and your vehicle is totaled. Your remaining loan balance is $18,500, and your insurance policy requires a $1,000 deductible. The insurance company then sends you a car insurance claim payment of $13,000 based on the vehicle’s market value.

Without gap insurance, you’d owe $5,500. With gap insurance coverage, you’d have coverage up to a certain percentage of your car’s value.

Gap insurance vs. full coverage

There’s no one definition of full coverage within the insurance industry, and no insurance type covers everything. Full coverage typically refers to the state-required liability coverage paired with optional comprehensive and collision coverage.

Carrying liability, comprehensive, and collision coverages can protect you financially from most costs in the event of an accident or theft.^[4] However, full coverage doesn’t include gap insurance.

Comprehensive and collision coverage will pay for a stolen vehicle or total loss up to the car’s actual value if it’s a covered claim. If you owe more on your car loan than your car is actually worth, you’re still responsible for the remaining loan balance not covered by your insurance claim payout.

Who needs gap insurance in North Carolina?

Gap insurance isn’t legally required in any U.S. state, including North Carolina. But North Carolina does require all vehicles registered in the state to have continuous liability insurance for the following amounts:^[2]

While North Carolina doesn’t require gap insurance, it can still be beneficial to have. 

“Gap insurance is similar to other types of car insurance because it protects your financial well-being after an accident,” says Walker.

Drivers who should consider getting optional gap insurance include:

• New-car owners who made a small down payment

• Car owners with loan terms longer than 60 months

• Car owners who carried over negative equity from their previous car loan

• Drivers who lease a vehicle

• Drivers who put a considerable amount of miles on their vehicles annually

• Owners of cars that depreciate quickly

Gap insurance provides financial protection for many vehicle owners, but it’s not always necessary.

Gap insurance may not be necessary if you:

• Made a down payment of 20% or more on a new-vehicle purchase

• Didn’t finance your vehicle

• Have less than five years left on your auto loan

• Drive a vehicle that historically doesn’t depreciate quickly

How to buy gap insurance in North Carolina

Not all drivers qualify for gap insurance. Most insurers only offer gap insurance if you meet the following criteria, according to Walker:

• The car is less than 2 to 3 years old.

• You also have comprehensive and collision coverage.

• You are the original loan/leaseholder.

You can purchase gap insurance from select insurance companies. Dealerships and auto loan lenders also sell gap insurance, but you may pay more since the cost is added to your auto loan payments with interest.

Some insurance companies only offer gap insurance as an add-on to an existing policy. In these cases, you’ll need to purchase coverage directly through your current insurance company or switch to another one.

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How much does gap insurance cost in North Carolina?

On average, North Carolina car owners pay $149 per month for a car insurance policy with gap insurance. Gap insurance costs vary depending on where you purchase coverage and other factors, like your age and driving record. Gap insurance added on to an existing auto insurance policy usually adds $20 to $40 to your annual premium.

Gap insurance purchased through a dealership is often a flat fee of several hundred dollars. It’s typically added to your loan payments, so you’ll pay interest on the added amount. But some dealerships may allow you to prepay the total amount. In the end, it’s typically cheaper to buy it from an insurance company that offers gap insurance.^[5]

Best gap insurance companies in North Carolina

Below are the five best insurance companies in North Carolina for gap insurance coverage based on their rates and Insurify Quality (IQ) Scores.

State Farm

State Farm (4.4 IQS) is the best option for car owners who finance their vehicles through State Farm Bank. The company includes payoff protector coverage with every vehicle loan originated through State Farm Bank, which covers the difference between your payout amount on a total loss claim and your outstanding auto loan balance. You must have a vehicle financed through State Farm Bank to qualify.

Erie

Erie (4.4 IQS) offers affordable gap insurance as part of its new car protection and better car protection coverages. The policies cover the difference between your insurance payout and the actual cash value of your vehicle. You can also receive a replacement vehicle two years newer than the covered vehicle if it’s totaled in an accident.

Allstate

Allstate (4.1 IQS) is among the best gap insurance companies for low rates and coverage for longer auto loans. The company’s gap insurance is available for both new and used vehicles that have been financed for up to 96 months.

Nationwide

Nationwide (4.1 IQS) offers low rates on gap insurance. The optional coverage is available for newer vehicles and is added to your collision insurance policy.

Progressive

Progressive (4.1 IQS) is one of the best choices for low rates on gap insurance for financed or leased vehicles. It offers loan/lease payoff coverage, which is similar to gap insurance. It covers up to 25% of the actual cash value to help you pay the difference.

How Insurify rates car insurance companies

Insurify uses an in-house, proprietary method to rate and review the best car insurance companies. The Insurify Quality Score uses more than 15 crucial criteria, including average premiums, customer satisfaction, discounts, and third-party ratings, to calculate a final score for a company.

Criteria are weighted by importance to the consumer — factors such as customer reviews and affordability influence the score more than availability and third-party ratings. With the Insurify Quality Score, Insurify is able to provide quantitative ratings for drivers to better compare car insurance companies and make informed decisions to meet their coverage needs.

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