How much does GAP insurance cost?

GAP insurance, which stands for guaranteed asset protection, helps you cover the difference between the market value of your vehicle and what it was worth before it left the lot. Basically, if your vehicle is totaled but you still owe money on the lease or loan, you’ll want GAP insurance.

Whether you buy it from a car dealer or an auto insurance company, GAP insurance could save you thousands if you get into an accident in a vehicle that you haven’t fully paid for. But how much will GAP insurance cost you?

With this guide, we’ll go over the cost of GAP insurance, show you where to buy gap insurance at an affordable price, and take a look at why you might want to purchase it for your new car or truck.

Once you know if GAP insurance is right for you, enter your ZIP code in the free online tool above to compare auto insurance rates and find a coverage option that’s right for you.

How much does GAP insurance cost?

GAP insurance’s cost varies depending on where you buy it from. Generally, GAP insurance from an insurance company will cost $30 per year on average, while GAP insurance from a dealership may cost upwards of $500.

It’s also important to keep in mind that GAP insurance is only valuable as long as the amount you owe on your vehicle exceeds the actual value of your car. As soon as you’ve paid off enough of your loan for your regular full coverage auto insurance to completely cover the cost of your totaled vehicle, you should contact your insurance company or dealership and ask about dropping your GAP coverage. This is when when GAP insurance does not pay off.

Where can you buy GAP insurance?

While you can buy GAP insurance from dealerships, in most cases, you’ll want to look for GAP insurance from an auto insurance company as this is usually far less expensive. GAP insurance from dealerships (and banks) may also charge interest. Even the most seemingly affordable GAP insurance from a dealership could end up costing you more than coverage from an insurance company.

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These major auto insurance companies all offer GAP insurance:

• Progressive
• Geico
• Allstate
• Esurance
• Travelers
• The Hartford
• Liberty Mutual
• American Family
• USAA
• Nationwide

What is the best auto insurance company that offers GAP insurance?

As GAP insurance will likely be a temporary form of coverage, it probably shouldn’t be your first priority when comparing insurance companies. That said, many major insurers offer affordable GAP insurance coverage that will cost you far less than similar options from a dealership or bank.

Read more: Does State Farm offer GAP insurance?

The companies with the best auto insurance rates for you will vary based on your location, vehicle, and driving history. We recommend starting your search by looking at options from Progressive, Geico, and Allstate as these are some of the largest auto insurance companies in the United States by market share.

Is GAP insurance worth it?

GAP insurance is almost certainly worth the modest increase to your yearly insurance payments if you want to be sure you’re getting back what you actually paid for your new car — as opposed to what it’s worth after it leaves the lot.

The table below will give you an idea of how much the value of your vehicle drops immediately after purchase.

In the scenario above, you would essentially lose $3,000 even if your auto insurance completely covers your totaled car (and that’s before we take your deductible into account). If you’re still paying off your car, you’d be even worse off without GAP insurance, as you would now owe $3,000 and have no car to show for it.

Read more: How to Buy Vehicles Directly From Insurance Companies

Who should purchase GAP insurance?

The Insurance Information Institute describes a few situations where GAP insurance would probably benefit a driver:

• If you’ve made less than a 20% down payment on your new vehicle
• If your vehicle is financed for 60 months or longer
• If you’re leasing your vehicle (GAP insurance is generally a requirement in this case anyways)
• If your vehicle depreciates faster than an average car or truck
• If you’ve rolled over negative equity from one car loan to another

What to Remember About GAP Insurance

• GAP insurance is usually required if your leasing a vehicle and is still a smart purchase if you owe money on your new car for a different reason. Without GAP insurance, you could end up paying thousands for a totaled vehicle
• You should always purchase GAP insurance from an auto insurance company instead of a dealership or bank. By doing so, you’ll pay less overall and avoid the interest charged by dealerships
• You don’t need GAP insurance if you’re not making payments on your vehicle. As soon as the value of your vehicle equals or exceeds the amount you owe on it, GAP insurance becomes an unnecessary expense

Now that we’ve taken a look at how much GAP insurance costs and who should purchase it, try our free online quote tool to compare companies and find the most affordable auto insurance coverage in your area.

Case Studies: Cost of GAP Insurance

Case Study 1: Affordable GAP Insurance from Auto Insurance Company

John purchased GAP insurance from his auto insurance company. He pays approximately $30 annually for his coverage. This option is affordable and provides him with the peace of mind knowing that he will be protected if his vehicle is totaled.

Case Study 2: Costly GAP Insurance from Dealership

Sarah decided to buy GAP insurance from a dealership when she purchased her new car. However, she ended up paying around $500 for the coverage. The dealership’s GAP insurance was significantly more expensive compared to the option available from an auto insurance company.

Case Study 3: Comparison Shopping for GAP Insurance

Michael wanted to find the best deal on GAP insurance, so he compared quotes from different insurance providers. After researching various options, he discovered that Progressive, Geico, and Allstate offered affordable GAP insurance coverage. He chose a policy from Progressive, which fit his budget and provided the coverage he needed.

Case Study 4: Value of GAP Insurance for Leased Vehicles

Emily leased a vehicle and was required to have GAP insurance. She opted for GAP coverage from her auto insurance company, which cost her approximately $30 per year. This insurance protected her from potential financial loss if her leased vehicle was totaled.

Case Study 5: Importance of GAP Insurance for Financing

Robert financed his new car with a loan and chose to purchase GAP insurance. He made a down payment of less than 20% and had a financing term of 60 months. The GAP insurance ensured that he wouldn’t face a significant financial burden if his car was declared a total loss.