How much does GAP insurance cost?

Guaranteed asset protection or GAP auto insurance covers “gaps” between your car’s worth and the remainder of an auto loan if the vehicle is stolen or totaled. So how much is GAP insurance, and who needs it?

Knowing how GAP insurance works is vital to understanding auto insurance if you take out an auto loan or lease your vehicle.

Keep reading to learn what GAP insurance is, how much it costs, and determine if you should add it to your auto insurance policy.

After learning about GAP insurance prices below, secure the best auto insurance coverage for you by entering your ZIP code into our free quote comparison tool above.

What is GAP insurance?

GAP insurance is an acronym that means guaranteed asset protection. It fills in the gap between the actual cash value of your vehicle and what you still owe on an auto loan if your vehicle is stolen or totaled.

It works in tandem with comprehensive and collision coverage. Usually, you cannot purchase GAP insurance unless you add comprehensive and collision coverage to your policy. This is because comprehensive auto insurance is the coverage that protects your vehicle if it is stolen.

Similarly, collision coverage is the insurance that protects your car if it’s totaled in an accident.

These coverages include auto insurance deductibles, typically costing $100 to $2,000.

Understand that even if you buy GAP insurance, you may still be responsible for any deductibles.

Read more: What is gap insurance and do I need it when filing an auto insurance claim? 

Plus, many dealerships and banks require you to invest in GAP insurance if you lease or finance a vehicle. So, how does GAP coverage work?

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Say you buy a new car for $30,000 and make some monthly payments. Your remaining principal is now $25,000. But the vehicle depreciates, so the ACV is only $20,000.

Now, imagine the vehicle is totaled in an accident, and your insurer says it’s no longer driveable.

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

Without affordable GAP insurance, your insurance company only pays the ACV of your vehicle.

You’re left to pay the $5,000 out of pocket yourself for a car you can’t even drive.

But with GAP insurance, the insurance company fills that gap, potentially leaving you responsible for just the cost of your deductibles.

How much does GAP insurance cost?

Your GAP insurance rates depend on how you purchase the coverage. Prices vary depending on whether you go through an insurance company, a dealership or bank, or a standalone company.

How much is GAP insurance per month from an auto insurance company? On average, it costs only one to three dollars per month or just $20 to $40 annually.

But ​​how much does GAP insurance cost from a bank or dealership? Typically, the fee is a flat rate averaging $500 to $700.

Plus, if you add GAP coverage to your auto loan, you ultimately pay additional interest on the coverage.

The average cost of GAP insurance through a standalone company varies, but most also charge flat rates between $200 and $400.

Overall, comparing GAP insurance quotes from auto insurance companies is usually the cheapest option for drivers. However, some factors do impact your GAP insurance prices.

Notably, the actual cash value of your vehicle, your ZIP code, your insurance claims history, and the age of your car affects your GAP insurance costs.

Who needs GAP insurance?

Not all drivers need GAP coverage. But, if you owe more on a car loan than the actual value of your vehicle, you should consider purchasing GAP insurance.

Some loan providers and dealerships require customers to invest in GAP insurance as part of the loan or lease agreements.

However, you should also consider adding this coverage to your policy if you took out a long-term loan lasting 60-months or more.

Similarly, if you bought a new car but put down only a small downpayment, you should invest in GAP insurance.

Anything less than 20% of the total worth of the vehicle is considered a small downpayment, according to the Insurance Information Institute (III).

All vehicles depreciate, but some depreciate faster than others, such as sports cars. If you’re getting auto insurance for sports car drivers or you drive a make and model that loses value quickly, you should also add GAP coverage to your policy.

Finally, if you rolled over any negative equity from previous car loans, investing in GAP insurance is a smart option.

You don’t need GAP insurance if you own your vehicle outright. Likewise, if your car is worth more than what you own on your loan, then GAP insurance may also not be necessary.

Where can I get GAP insurance?

Typically, you can purchase GAP insurance from many of the best auto insurance companies, car dealerships, banks, other lenders, or standalone companies.

The cheapest option for most drivers is almost always purchasing GAP insurance from an auto insurance company.

Not all insurance companies offer GAP insurance. For example, Geico auto insurance does not offer GAP coverage of any kind. Similarly, some companies only offer GAP coverage for new vehicles or cars under a certain age.

Some companies sell loan/lease policies or use other similar names. Those policies typically work like GAP coverage but may be more limited.

We suggest looking at Allstate, Nationwide, Progressive, Travelers, and Safeco for affordable GAP insurance coverage.

USAA also offers GAP insurance. However, this company is a military-only insurer.

While State Farm auto insurance does not technically offer GAP coverage, it does offer something called Payoff Protector that works exactly like GAP insurance. To qualify for Payoff Protector, you must finance your loan through State Farm Bank. The coverage is automatically applied to your loan.

You do not have to be a State Farm auto insurance customer to qualify.

To find your best GAP insurance company, compare quotes online from the top insurers near you.

How much is GAP insurance? The Bottom Line

For most drivers, GAP insurance coverage costs less through an auto insurance company than it does from a dealership, bank, or standalone company.

Rather than paying a flat fee of $500 to $700 through a bank or dealership, securing this coverage through an auto insurance company may only cost you a few dollars per month.

Anyone who took out a long-term loan, made a small downpayment, drives a car that depreciates quickly, or leases a vehicle should consider adding GAP coverage to their policy.

Now that you’ve analyzed GAP coverage costs, find the best auto insurance policy for you by entering your ZIP code into our free rate comparison tool below.