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Overpaying on car insurance?

Which Companies Are the Best Gap Insurance Providers?

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Gap insurance, also called loan or lease coverage, is a terrific product for many motorists. This optional endorsement may prevent financial hardships after a wreck. If you’re purchasing a new car, should you add gap insurance? Stick with us as we dive deep into this product and come up with the clear and concise answers you want.

What Is Gap Insurance?

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Guaranteed Auto (or Asset) Protection, or gap insurance, kicks in after you total your car in an accident or it gets stolen, and you don’t recover it. This product covers the difference, or the “gap,” between your wrecked car’s actual cash value and your loan or lease balance.

Gap insurance ensures that you don’t have to continue making payments on a car you can’t drive, either because of damage or theft. Most gap insurance policies work with your comprehensive and collision coverages, as these products pay out the car’s value, while your gap insurance covers the rest.

Who Are the Cheapest Gap Insurance Providers?

The cheapest gap insurance providers include Liberty Mutual, The Hartford, and Travelers, based on factors like cost and maximum payout amount. While not all insurance companies offer gap insurance, many do. Nationwide, Kemper, Progressive, and Esurance also made our list of cheap insurance companies that sell gap products.

Remember, too, that it’s usually less costly to purchase your gap coverage directly from your auto insurance carrier than to buy it from a dealership. Avoid adding it to your loan, or you’ll end up paying interest on your premium, potentially adding hundreds of dollars to your payoff amount.

How Much Is Gap Insurance?

Most gap insurance policies cost between $20 to $40 a year. Of course, it depends on which company you buy it from. Insurance.com reports that Progressive charges around $60 annually, while Esurance bills its customers just $20 for the same term.

No motor vehicle agency requires you to buy gap insurance, but it can be quite valuable. To ensure you get the best deal, get a quote from your current auto insurance carrier. Adding more products with the same company you have a relationship with may open up doors to discounts, like bundling.

Some providers will let you add gap coverage to your existing comprehensive or collision policy when you’re insuring a new car, like a 2022 Kia Carnival minivan. However, avoid buying this endorsement from your dealership. Most sellers added a hefty mark-up — an average of 300% indicates a National Consumer Law Center report. You may also find a standalone gap policy, although few insurance companies offer this coverage on their own. You may have to go through your lender if you want to go with this option.

Is Gap Insurance Worth the Money?

Since gap insurance is so reasonable, choosing to add it to your policy is a no-brainer. It’s hard not to opt-in because it offers a layer of protection between your car’s actual cash value and what you owe the bank. If you’re still not sure if gap insurance is right for you, consider the following, and if you answer no to any of these questions, you might want to take a closer look at this insurance:

  • Do you have enough cash in savings to pay off your loan if you lost your car today?
  • Do you have 20% or more to put down on your new car?
  • Will you finance your car for four years or more?
  • Do you drive a lot? The more miles you put on your car, the faster it depreciates.
  • Is your car a high-performance model, luxury sedan, or electric vehicle?
  • Does your household have more than one vehicle to get around?
  • Will you roll negative equity from your last car into your new loan?

Can You Buy Gap Insurance Any Time?

Gap insurance can be a terrific investment for drivers who still have a loan or lease on their car. However, can you add this coverage at any time to any vehicle? Unfortunately, no. Some insurance carriers let you purchase a policy anytime, while others give you a short window to add a gap endorsement to your policy. Other providers require you to buy a brand-new vehicle in order to meet eligibility requirements for coverage.

Insurance agents define “brand-new” in a couple of different ways. However, the phrase typically means that you are the car’s first owner and that the manufacturer made it within the last two or three years. Generally speaking, you also have a limited time after you drive off the lot to add a gap endorsement. Unfortunately, most companies won’t let you wait more than a year. So if you believe you’re going to be underwater on your loan, add gap insurance right away. Just make sure to set aside your deductible in a savings account with easy access.

Alternatives to Gap Insurance

Some insurance companies offer alternatives to gap insurance. For example, USAA’s Car Replacement Assistance (CRA) covers the same costs as traditional gap insurance, but only for eligible members. This product differs from many because you can have an auto loan through another lender and still buy a policy from USAA, and it pays 20% more than the value of your car. USAA calls its version of gap insurance “Total Loss Protection,” while State Farm refers to its product as the “Payoff Protector.”

Liberty Mutual offers New Car Replacement policies. Because new cars depreciate so quickly, up to 10% of their purchase price within the first month, this insurer provides an extra layer of protection to help you avoid financial loss. If you total your car within the first year or 15,000 miles, Liberty Mutual will pay you enough to buy a brand-new vehicle of the same make and model regardless of depreciation.

Gap insurance is definitely worth the money if you owe more on your car than it’s worth. State agencies never require proof of this type of coverage, so the decision to buy it is entirely up to you. Will you opt for the added protection, or will you hit the road without it and take the risk?

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

We’re here to help you simplify car care and save, so this post may contain affiliate links to help you do just that. If you click on a link and take action, we may earn a commission. However, the analysis and opinions expressed are our own.

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About the Author

FIXD Research Team

FIXD Research Team

At FIXD, our mission is to make car ownership as simple, easy, and affordable as possible. Our research team utilizes the latest automotive data and insights to create tools and resources that help drivers get peace of mind and save money over the life of their car.

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