GAP Insurance Pricing and Coverage

How much GAP insurance costs depends on if you purchase it from a dealership, loan provider, or car insurance company. GAP insurance rates from insurance companies are cheaper than buying it from a dealership or loan provider. Quotes from insurance companies are $20 to $40/y, but through a dealership or lender, it may be as much as $500 to $700.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

UPDATED: May 4, 2022

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Here's What You Need to Know

  • GAP insurance fills in any gaps between the actual cash value of your car and what you still owe on a loan in the case of a total loss
  • GAP insurance prices average around $20 to $40 annually from car insurance companies
  • But from a dealership or loan provider, GAP insurance rates average $500 to $700

Guaranteed asset protection or GAP insurance fills gaps between what’s owed on a loan and the actual cash value (AVC) of a vehicle in the event of a total loss. But how much is GAP insurance, and who needs it?

If you lease or finance a car, learning about GAP insurance is vital to understanding your car insurance policy.

Below, learn how GAP insurance works, uncover the best way to buy GAP insurance for the most significant value and determine if you should invest in this car insurance coverage.

After reading about the average cost of GAP insurance, compare quotes for free from the best car insurance companies near you by entering your ZIP code into our rate tool above.

What is GAP insurance?

GAP insurance is an acronym for guaranteed asset protection insurance. It covers the difference between your car’s worth and the remaining principal on an auto loan if your vehicle is totaled or stolen.

Many dealerships and loan providers require customers to purchase GAP coverage as part of the loan or lease agreement.

You also typically need to invest in both comprehensive and collision insurance to buy GAP insurance.

This is because comprehensive insurance is the coverage that replaces your vehicle if it’s stolen. Similarly, collision insurance is the coverage that replaces your car if it’s totaled in a car accident.

Both collision and comprehensive insurance have deductibles, usually ranging from $100 to $2,000.

So even with GAP coverage, you may still be responsible for paying your deductible amount yourself in the event your car is stolen or totaled.

But how exactly does GAP insurance work?

Imagine buying a new car for $30,000 and taking out an auto loan.

After a few months, your remaining principal is $25,000. But due to vehicle depreciation, the actual cash value (ACV) of your car is only $20,000.

Now imagine you’re involved in an accident, totaling your vehicle.

The table below shows what you might owe with and without GAP coverage.

GAP Insurance Example
DetailsCosts
Remaining auto loan principal$25,000
Actual cash value of vehicle$20,000
Insurance payment without GAP insurance$20,000
Deficit without GAP insurance$5,000
Insurance payment with GAP insurance$25,000
Deficit with GAP insurance$0, plus any deductibles
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Without GAP insurance, your insurance company only covers the ACV of your car, so $20,000.

That means you still owe $5,000 out of pocket for a car that you can’t even drive anymore.

But if you purchase GAP insurance, your car insurance company covers the deficit between the ACV and the remaining balance on your loan, minus any deductibles.

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How much does GAP insurance cost?

GAP coverage costs less through a car insurance company than through your dealership or loan provider. Some standalone GAP insurance companies also exist.

How much is GAP insurance per month through a car insurance company? On average, it costs as little as $1 to $3 per month to add GAP coverage to your policy.

That’s only $20 to $40 annually for GAP coverage, on average.

One significant benefit of purchasing coverage through a car insurance company? You can usually remove GAP insurance once you no longer owe more on your loan than the worth of your vehicle.

On the other hand, dealerships, banks, and even standalone GAP insurance companies usually charge flat rates for the coverage.

So how much does GAP insurance cost through a dealership or loan provider? The average is closer to $500 to $700 total, much higher than what you typically pay through a car insurance company.

Plus, if you purchase it through your loan provider, you end up paying additional interest on the coverage.

Rates vary from standalone companies, but most charge a flat fee costing between $300 to $400, on average.

If you do go through an insurance company, understand that some variables impact the cost of your GAP insurance policy.

Specifically, the actual cash value of your car, your ZIP code, the age of your vehicle, and your car insurance claims history affect the price of your GAP insurance.

Who needs GAP insurance?

The following people may benefit from investing in GAP insurance.

If you purchased a new car but paid with a small down payment, you should look into GAP coverage.

According to the Insurance Information Institute (III), a small down payment is typically considered less than 20% of the vehicle’s worth.

If you took out a long-term loan for 60 months or longer, you should consider investing in GAP insurance.

GAP insurance may be required if you lease a vehicle as part of your agreement. Similarly, some loan providers also require the coverage.

Some vehicles depreciate faster than others, like sports cars, for example. So if you take out a loan for a car that depreciates quickly, consider adding GAP insurance to your policy.

Finally, GAP insurance is also helpful if you have any rolled-over negative equity from an old car loan.

But if you own your car outright, GAP coverage is unnecessary. Plus, if you owe less on your loan than the ACV of the vehicle, then you likely do not need GAP coverage.

Where can I get GAP insurance?

You can usually buy GAP insurance from a car dealership, bank or credit unions, lenders, car insurance companies, or standalone GAP insurance companies.

Your cheapest GAP insurance quotes almost always come from car insurance companies.

However, not all of the top insurers offer this service. For example, there is currently no GEICO gap insurance.

Similarly, some companies sell loan/lease policies or use similar alternative names. These policies typically work like GAP insurance but are often more limited.

However, we recommend looking into Allstate car insurance company, Nationwide car insurance company, and Progressive car insurance company for GAP coverage.

Travelers car insurance company and Safeco car insurance company are also strong options in regions where the companies are active.

USAA car insurance company only writes policies for military personnel and their immediate families. But if you qualify, it is another great GAP insurance company.

Similarly, State Farm car insurance company technically does not offer GAP insurance. Instead, if you go through State Farm Bank for your loan, you can opt into the Payoff Protector feature.

It works exactly like GAP insurance, and you qualify for the coverage as long as State Farm Bank financed your loan, even if you’re not a State Farm car insurance policyholder.

Overall, find the most affordable GAP insurance company for you by comparing quotes online from multiple top insurance companies.

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How much is GAP insurance? The Bottom Line

Ultimately, GAP coverage costs less through a car insurance company than through a dealership, lender, bank, or even most standalone companies.

If you took out a long-term loan on a vehicle, paid with a small down payment, lease your car, or drive a make or model that depreciates quickly, consider adding GAP insurance to your policy.

Now that you’ve learned about GAP insurance costs, enter your ZIP code into our free quote comparison tool below to receive rates from the best car insurance companies in your region.

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