Does State Farm offer GAP insurance?

Buying a new car is an accomplishment, especially if you’re buying your dream car. Few things in life feel the same as when the dealer puts the keys in your hand and you get to drive your car for the first time.

Then, imagine how you would feel if someone runs a red light and smashes into your new car, totaling it. It’s a heartbreaking situation, but drivers find themselves in this situation all the time. Your car’s value depreciates as soon as you drive it off the lot, but the amount of your loan stays the same.

What do you do if your vehicle is totaled and its value is less than what you owe? Especially if your auto insurance doesn’t cover everything?

Guaranteed Asset Protection – or GAP – insurance covers the difference between your car’s worth and how much you owe on your loan. So, who offers GAP insurance? Most major insurance providers sell either GAP coverage or something similar, including State Farm.

If you want to buy State Farm GAP insurance, you should still see what other companies offer you. Enter your ZIP code into our free tool today when you’re ready to see what quotes might look like for you.

Does State Farm sell GAP insurance?

Potential customers often want to know what GAP coverage they can buy and how much State Farm GAP insurance costs.

State Farm is one of the big insurance companies that doesn’t have a specific GAP coverage option. Instead, State Farm customers have access to the Payoff Protector benefit.

Every car that State Farm finances automatically gets Payoff Protector. Despite a different name, the Payoff Protector works similarly to GAP insurance.

If your new car is stolen or totaled, your collision or comprehensive coverage still applies, even if it comes from a different company.

After your car insurance pays for its portion, Payoff Protector pays the rest of what you owe to State Farm for your car loan. Of course, your loan needs to be in good standing for Payoff Protector to cover you if something happens to your car.

Unfortunately, not everyone can buy Payoff Protector. Only people who have auto loans through State Farm are eligible for this benefit.

How does GAP insurance work?

Practically everyone’s heard that your car loses a quarter of its value the second you drive it off the lot. While depreciation isn’t that extreme, you do lose some of the value on your first day of ownership.

Since you initially lose value, your loan automatically becomes upside down or underwater, meaning you owe more on it than the car is worth.

If your car is stolen or declared a total loss while your loan is underwater, GAP insurance prevents you from paying on a car you no longer have.

Your car can be declared a total loss easier than you might think. Though it depends on your car insurance company, most providers will declare a total loss once the repair costs reach a specific percentage of the car’s value.

For most companies, that percentage is anywhere between 75 and 90%. Some repairs can be very costly, especially on new vehicles. It’s not too difficult for a car to be declared a total loss.

Other Companies That Sell GAP Insurance

If you want GAP insurance, but your heart was set on State Farm, you’re probably disappointed that there is no option to buy it.

The good news is that plenty of other quality companies offer GAP insurance. While it might not come from State Farm, the following companies can provide you GAP. (For more information, read our “Understanding Gap Insurance: What is it and how does it work?“).

Allstate GAP Insurance

Allstate is one of State Farm’s top rivals and it offers a GAP insurance plan that anyone can buy.

If your car is declared a total loss, Allstate will cover up to $50,000 to pay off the remaining balance on your loan or lease. A bonus is that your GAP coverage applies to your car insurance deductible.

While prices vary, you could pay as little as $20 for a 6-month policy.

Read more: Does Allstate offer GAP insurance?

Progressive GAP Insurance

Another company that offers a traditional GAP policy, Progressive’s plan covers 25% of the total cash value of your vehicle. That means that if the actual cash value of your car is $10,000, Progressive will cover $2,500.

You can’t buy GAP insurance without an existing Progressive policy, but prices are extremely affordable. Typically, GAP starts at $5 a month.

Nationwide GAP Insurance

While you can buy GAP insurance from Nationwide, it is one of the only companies where you have to pay a deductible if you file a claim.

Before buying a GAP policy from Nationwide, you should make sure the deductible is affordable.

Other Companies That Sell GAP insurance

Travelers, American Family, and Safeco sell traditional GAP policies. Other companies like USAA have programs similar to State Farm’s (USAA’s is called Total Loss Protection, and only military members are eligible for it).

Other insurance providers don’t offer any form of GAP insurance. For example, there is no such thing as Geico GAP insurance.

Is GAP insurance worth it?

Whether or not GAP insurance is worth purchasing for you depends on your situation. GAP might be worth considering if any of the following apply to you.

• Lessees. There’s a good chance that your car lease already has some form of GAP insurance built into it. Payments on leases are typically smaller than loans which means there can be a difference in the value of the car and the amount owed on your lease for much longer.
• You made a small down payment on your car. When you put a small amount of money down for a car loan, you owe more on it. GAP protects you from going upside down on your loan.
• You have a car that depreciates quickly. The faster your car depreciates value, the less actual cash value it has. Sports, luxury, and other high-end vehicles depreciate the fastest.
• You chose an extended loan period. Since cars typically lose up to 20% of their value in the first year, it might be a good idea to get GAP insurance if you choose an extended loan.

However, if you have a short loan, you put a large down payment on your car, or you don’t drive very much, it might be best for you to skip GAP.

Find GAP Insurance Today

While an affordable State Farm GAP insurance option doesn’t exist unless your auto loan is with them, there are plenty of other options. You can find GAP insurance from reputable insurance providers as highly rated as State Farm.

Before you give up on State Farm GAP insurance quotes, you should look at what their rivals can offer you. Enter your ZIP code into our free tool if you’re ready to see what rates could look like for you.

Case Studies: State Farm’s Offering of GAP Insurance

Case Study 1: Sarah’s Vehicle Replacement

Sarah, a State Farm policyholder, bought a $40,000 new car. Sadly, the vehicle was totaled in a major accident a few months later. Fortunately, Sarah had GAP insurance with State Farm, which covered her remaining auto loan balance and gave her extra money to buy a new car. This prevented her from facing significant financial setbacks while replacing her vehicle.

Case Study 2: John’s Negative Equity Protection

John financed a used car with a loan and chose State Farm’s GAP insurance. Economic downturn caused the car’s value to drop. When John sold the car, it was worth less than his loan balance. State Farm’s GAP insurance covered the difference, saving John from negative equity.

Case Study 3: Melissa’s Lease Protection

Melissa leased a luxury SUV with GAP insurance from State Farm. When the vehicle was stolen and never recovered, State Farm’s GAP insurance covered the difference between the stolen car’s value and the remaining lease balance. This relieved Melissa’s financial worries and allowed her to continue without the burden of additional lease payments.